MUELLER INDUSTRIES INC (MLI) stock intrinsic value fair value estimate & owner earnings analysis

Mueller Industries makes copper tube, copper and brass fittings, brass rod, valves and related products. Most of its sales go to plumbing, refrigeration and air-conditioning wholesalers and equipment makers, through three segments: Piping Systems, Industrial Metals and Climate. Copper is passed through to customers. What Mueller earns is the fabrication spread on top of the metal, so revenue moves with the copper price while profit moves with that spread and with construction volumes. About 79% of 2025 sales of $4.18 billion were booked in the United States. The rest came from Canada, the United Kingdom, Asia and the Middle East, and Mexico. All figures below are per share on today's share count, after the two-for-one split that took effect July 1, 2026. Cash earnings have changed level. From 2016 to 2020, owner earnings (operating cash flow minus working-capital swings, stock compensation and the capital spending needed to keep the plants running) were $0.33 to $0.75 per share. Since 2021 the spread has been much wider. Gross margin was 29.0% in 2025, against about 18% in 2020. Owner earnings were $2.87 in 2022, $2.46 in 2023, $2.68 in 2024 and $3.17 in 2025. The higher level has lasted through a housing slowdown in 2023-2024, when revenue fell 14%, and through falling copper-tube volumes in 2025. That is real evidence it is not just a one-year spike. The 2016-2020 record is equally real evidence that spreads can be much thinner. How we measured it. Working-capital swings are removed because copper price moves inflate and deflate receivables and inventory. For example, 2021 operating cash flow was depressed by $170 million of working-capital build as copper rose. The company holds about $1.42 billion of cash and short-term investments and only $5 million of debt. We add that cash (less $150 million kept for operations) to the value directly. So we take out the after-tax interest income it earns, about $0.13-0.18 per share a year, so it is not counted twice. We also take out the share of profit that belongs to minority partners in subsidiaries, and the insurance proceeds from the March 2023 tornado at the Covington, Tennessee plant (which also produced a $41.1 million one-time accounting gain in 2025). On that basis the business itself earned about $2.80 (2022), $2.19 (2023), $2.34 (2024) and $2.90 (2025). Starting level. We use the 2022-2025 period, which reflects the business as it now operates. The median is about $2.57. We lift it to $2.70 because 2022-2023 do not include the Nehring (June 2024) and Elkhart (August 2024) acquisitions, which added about $243 million of 2025 sales. Owner earnings grew 18% in 2025, or 24% on the business-only measure. Our base case assumes 2026 comes in at about $3.00, only about 3% above 2025. That is supported by the first half of 2026: revenue was up 23%, unit volumes rose in all three segments, and two small acquisitions closed (Bison Metals Technologies and Chicago Extruded Metals). Part of the first-half strength comes from copper averaging over $6 a pound, so we do not carry it forward. Bear case, $29 per share. Spreads return toward the pre-2021 structure over four years, as they were for the whole decade before 2021. Earnings fall from $2.70 in 2026 to about $1.20 by 2030. That is the 2020 level plus the businesses acquired since, and it holds from there, since Mueller earned positive cash through the 2016-2020 trough. The business is worth about $23.30 per share ($5.2 billion), it owes essentially nothing, and net surplus cash adds $5.70. Base case, $51 per share. 2026 at about $3.00, then $2.70 a year, the cycle-average level, with no growth credited. The copper-tube, fittings and brass-rod franchise is over a century old and serves replacement and HVAC demand. On that record the earning power is held flat after year ten rather than faded. Business value is about $45.30 per share ($10.0 billion) plus $5.70 of net cash. Bull case, $58 per share. Current strength carries into 2027 ($3.50, then $3.30), and spreads settle at the 2025 level of about $3.10 including the 2026 acquisitions. Business value is about $52.20 per share plus $5.70 of net cash. What we left out. We credit no growth from future acquisitions, even though Mueller has a long record of bolt-on deals. Each deal uses cash we have already counted, and the payoff is not secured in advance. We also credit no benefit from US tariffs. The company's own filing presents tariffs as a source of uncertainty, not protection, and notes the February 2026 Supreme Court ruling that struck down some of them. Nor do we credit a housing recovery, which management hopes for but has not delivered. Margin-of-safety price. The range is wide: the bear case is about 43% below the base. The margin-of-safety price is near $30: from there the base case implies about 20% a year over roughly three years toward the base value, including a dividend of about $0.70 a year. From that price the bear case implies an outcome close to break-even. Change since our previous estimate. Our previous figures ($50.60 / $98.90 / $143.80) were stated before the July 2026 split. On today's share count they equal about $25 / $49 / $72. The base value is little changed. The bear case is higher because the business has now held its higher earnings through a full housing slowdown. The bull case is lower because we no longer assume 7% yearly growth that no contract or proven process secures. The earlier figures also counted interest on the cash pile as well as the cash itself, and we have removed that overlap. What would prove this wrong: spreads falling back to pre-2021 levels faster than the bear case assumes, or the cash being spent on acquisitions that return little.