Zurn Elkay Water Solutions Cor (ZWS) Earnings & Analysis

Latest quarter

Zurn Elkay reported Q3 FY2026 revenue of $495.1 million, above the consensus of $493.8 million and up from $455.4 million a year earlier. Adjusted earnings per share of $0.52 also exceeded the consensus of $0.50. On a diluted basis, earnings per share rose to $0.45 from $0.36.

The company’s filing attributed sales growth to a 7% increase in core sales, with growth in nearly all product categories, and an additional 2% increase from the Intellihot acquisition. CFO Daniel Klun said water safety and control and drinking water led product-category growth, while price and unit volume also contributed.

Zurn Elkay reported gross margin of 49.6%, compared with 44.1% a year earlier, and operating margin of 21.9%, compared with 17.0%. The filing attributed the operating-margin increase to product mix, productivity initiatives and supply chain repositioning. The company reported quarterly free cash flow of $102.4 million, up from $93.9 million a year earlier.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

CFO Daniel Klun said growth extended across most product categories, led by water safety and control and drinking water. He said Intellihot was performing in line with expectations and contributed $6 million of sales growth in the quarter. Price added 2 points to year-over-year growth, with unit volume accounting for the remainder.

Klun said the company had fully cycled the carryover benefit of its 2025 tariff-related price increases. Asked about the shift into the fourth quarter, CEO Todd Adams said the company had anticipated a slowing market and that “the biggest difference Q3 to Q4 is clearly the change in the price realization year over year.” Adams said the company had assumed no additional fourth-quarter price increase beyond those already implemented.

Looking toward 2027, Adams said a price increase was planned, but its scale could change with input costs and competition. He said the broader economy and parts of the company’s end markets did not appear likely to provide a tailwind. On the call, Adams said the company was not yet guiding for 2027.

On margins, Klun attributed the third-quarter adjusted EBITDA margin increase to product mix, productivity gains and supply chain repositioning. He said the products carrying the highest margins continued to lead growth. The company also recognized $1.5 million of tariff refunds in the quarter, which Klun said were excluded from non-GAAP measures.

Adams said Zurn Elkay had been developing internal resources to enter additional markets and could combine its own development with acquisitions. He said the company could enter markets independently if a potential acquisition target was unwilling to sell. COO David Pauli said regional demand varied, and that the company had strengthened its representative networks and resources across regions.

Guidance

On the earnings call following the third-quarter results, CFO Daniel Klun said Zurn Elkay was raising its full-year FY2026 adjusted EBITDA outlook to a range of $512.0 million to $515.0 million.