Zurn Elkay Water Solutions Corporation (NYSE:ZWS) is one of the 11 Best Water Management Stocks to Buy. On February 3, 2026, Zurn Elkay Water Solutions Corporation (NYSE:ZWS) announced fourth-quarter net sales of $407 million, up from $371 million the previous year, with 10% core sales growth across nearly all product segments. The firm reported net income from continuing operations of $42 million, or $0.24 per diluted share, up from $36 million, or $0.21 per share. Adjusted earnings per share rose to $0. ...

Customer Concentration - The top five customers accounted for approximately 38% of consolidated net sales, with one customer representing 18%[83] - In fiscal 2025, the three largest independent distributors generated approximately 32% of consolidated net sales, with the largest accounting for 18%[85] Supply Chain and Raw Materials - The company relies on third parties for raw materials, including bronze, iron, brass, and stainless steel, making it vulnerable to price fluctuations[89] - The U.S. government announced additional tariffs in 2025, which could impact the cost and availability of raw materials[89] Financial Performance - Net sales for the year ended December 31, 2025, were $1,695.9 million, an increase of 8.3% compared to $1,566.5 million in 2024[194] - Income from operations for the year ended December 31, 2025, was $278.9 million, representing 16.4% of net sales, up from $244.6 million or 15.6% in 2024[195] - Net income for the year ended December 31, 2025, was $198.0 million, compared to $160.2 million in 2024, with diluted net income per share increasing to $1.15 from $0.92[202] - The income tax provision for the year ended December 31, 2025, was $63.9 million, resulting in an effective tax rate of 24.9%, up from 23.2% in 2024[199][200] - For the year ended December 31, 2025, the company reported a net income of $198.0 million and an Adjusted EBITDA of $442.2 million[209] Operational Risks - The ongoing updates to the Enterprise Resource Planning (ERP) systems could cause substantial business interruptions if ineffective[91] - Economic and financial market weaknesses may adversely affect the company's financial condition and results of operations[67] - The company faces risks associated with competition, including larger rivals with greater resources[71] - The inability to effectively manage risks related to changing technology could place the company at a competitive disadvantage[73] - Increased frequency of adverse weather events could disrupt construction activity, negatively impacting product demand and financial performance[96] - Future outbreaks of infectious diseases could disrupt supply chains and impair the company's ability to conduct ordinary business activities[99] Environmental and Regulatory Compliance - The company expects to incur significant costs for environmental compliance and liabilities under environmental laws and regulations, which could adversely affect its reputation and financial condition[120] - The company is subject to evolving data privacy and security laws, with non-compliance potentially resulting in fines and penalties[93] - The physical impacts of climate change may materially affect the company's operations and financial performance over time[98] Human Resources - The company faces intense competition for skilled personnel, which may hinder its ability to recruit and retain key employees, adversely affecting business operations[95] Financial Management and Debt - Cash provided by operating activities increased to $346.5 million in 2025 from $293.5 million in 2024, driven by higher net income[219] - Total indebtedness as of December 31, 2025, was $496.5 million, with $476.4 million attributed to term loans[222] - The company had $300.5 million in cash and cash equivalents and $189.9 million of additional borrowing capacity under its revolving credit facility as of December 31, 2025[215] - The company’s credit agreement restricts actions such as incurring additional debt if the maximum Net First Lien Leverage Ratio of 5.0 to 1.0 is not met[210] - The Net First Lien Leverage Ratio as of December 31, 2025, was 0.53 to 1.0, indicating strong compliance with debt covenants[210] Pension and Restructuring - The company terminated its U.S. defined benefit pension plan in 2025, which may lead to additional funding requirements subject to regulatory review[110] - The company’s pension plan will be terminated effective April 1, 2025, following a freeze of benefit accruals on March 31, 2025[175] - The company recorded restructuring charges of $9.6 million for the year ended December 31, 2025, down from $15.3 million in 2023[193] - A pre-tax settlement gain of $10.0 million was recognized from the termination of the U.S. defined benefit pension plan during the quarter ended September 30, 2025[186] Asset Management - As of December 31, 2025, the company's goodwill and intangible assets totaled $1.63 billion, representing a significant portion of its total assets[109] - The company recognized fixed asset impairment charges of $2.0 million, $7.4 million, and $2.5 million for the years ended December 31, 2025, 2024, and 2023, respectively[172] Strategic Initiatives - The company operates a growth-oriented, pure-play water management business with a broad sustainable product portfolio aimed at improving health, hydration, human safety, and the environment[163] - The company has a strategic sourcing program aimed at reducing the number of suppliers and lowering material costs[167] - The company is committed to achieving its sustainability strategy goals, but acknowledges that various factors may impact its ability to do so[125] Market Risks - The company is exposed to market risks from foreign currency exchange rates and interest rates, managed through operational activities and derivative financial instruments[231] - Approximately 10% of sales originated outside of the United States for the year ended December 31, 2025[233] - A 10% strengthening of the USD as of December 31, 2025, would decrease stockholders' equity by approximately $13.1 million[233] Interest and Financing - Interest expense, net decreased to $28.6 million for the year ended December 31, 2025, from $33.1 million in 2024 due to lower interest rates[196] - The weighted-average effective interest rate on the term loan facility was 5.80% as of December 31, 2025[235] - The weighted-average interest rate during the year ended December 31, 2025, was 6.36%[235] - A 100 basis point increase in Term SOFR would increase annual interest expense under the term loan facility by approximately $4.9 million[236]

Zurn Elkay Water Solutions (NYSE:ZWS) Q4 2025 Earnings call February 04, 2026 08:30 AM ET Company ParticipantsDavid Pauli - CFOJames Coe - Equity Research AssociateTodd Adams - Chairman and CEOConference Call ParticipantsAdam Farley - Associate AnalystBen Pezan - Research AnalystBrett Linzey - Equity Research AnalystBryan Blair - Managing Director and Senior AnalystJeff Hammond - Managing Director and Equity Research AnalystOperatorGood morning and welcome to the Zurn Elkay Water Solutions Corporation Fourt ...

Zurn Elkay Water Solutions (NYSE:ZWS) Q4 2025 Earnings call February 04, 2026 08:30 AM ET Company ParticipantsDavid Pauli - CFOJames Coe - Equity Research AssociateTodd Adams - Chairman and CEOConference Call ParticipantsAdam Farley - Associate AnalystBen Pezan - Research AnalystBrett Linzey - Equity Research AnalystBryan Blair - Managing Director and Senior AnalystJeff Hammond - Managing Director and Equity Research AnalystOperatorGood morning and welcome to the Zurn Elkay Water Solutions Corporation fourt ...

Financial Data and Key Metrics Changes - In Q4 2025, sales grew 10% organically year-over-year, with EBITDA increasing 14% to $104 million and margins expanding 100 basis points to 25.6% [3][9] - Free cash flow for the quarter was $83 million, totaling $317 million for the year, a 17% increase over 2024 [3][10] - The company repurchased about 3% of its outstanding shares for $160 million and paid $64 million in dividends, while leverage declined to 0.4 times [3][10] Business Line Data and Key Metrics Changes - Q4 sales totaled $407 million, reflecting 10% core and reported growth year-over-year, with non-residential end markets outpacing softness in residential and commercial segments [8] - Adjusted EBITDA for Q4 was $104 million, with a margin of 25.6%, driven by productivity initiatives and continuous improvement activities [9] - For the full year, adjusted EBITDA increased to $129 million, with a 40% drop-through on year-over-year volume increase [9] Market Data and Key Metrics Changes - The institutional and waterworks end markets are expected to grow at low single digits, while the commercial market is projected to be flat and the residential market remains challenging [18] - The company anticipates core sales growth of 7%-8% in Q1 2026, with incremental adjusted EBITDA margins of approximately 35% [19] Company Strategy and Development Direction - The company completed its annual three-year strategic planning process and is focused on leveraging competitive advantages to enhance organic growth opportunities in adjacencies and underserved verticals [5] - The strategic planning process evaluates all aspects of the business, including markets, competition, and product offerings, to align organizational priorities for the next few years [5] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in executing a positive dollar price-cost impact from tariffs in 2026, while monitoring the evolving tariff environment [19] - The company is optimistic about its ability to cultivate M&A opportunities and invest in organic growth, with a focus on adjacencies identified during the strategic planning process [30][64] Other Important Information - The company launched ProFiltration, enhancing water quality and sustainability, and expanded its filtration portfolio with new products [11][12] - Sustainability efforts included significant philanthropic giving and recognition from various sustainability ratings [14] Q&A Session Summary Question: Core sales outlook for 2026 - Management indicated a strong start to 2026, projecting core sales growth of 7%-8% for Q1, with potential for exceeding annual expectations [26][27] Question: Deal environment and M&A opportunities - Management noted a fresh view on adjacencies and ongoing cultivation of M&A opportunities, expressing optimism about potential transactions [28][30] Question: Details on adjacencies and verticals identified - Management described adjacencies as North American-based, focusing on water and plumbing, with plans to leverage existing products into new verticals [33][34] Question: Impact of recent metal price increases on pricing strategy - Management acknowledged monitoring metal prices and indicated a judicious approach to any incremental price increases [36] Question: Drinking water business and EPA regulations - Management views recent EPA regulations as sustaining the healthy trajectory of the drinking water market rather than accelerating it [40][42] Question: Incremental margin guidance for 2026 - Management expressed confidence in maintaining a baseline incremental margin of 35%, with potential for improvement over time [44][45] Question: Construction industry indicators and project conversion - Management is comfortable with the guidance for 2026, reflecting current market conditions and incoming order rates [48][49] Question: Filter attachment rates and ProFiltration - Management reported good early adoption of ProFiltration, expecting high attachment rates to drive future sales [50][53] Question: Pricing in Q4 and 2026 outlook - Management indicated Q4 pricing was about 5 points, with expectations for higher pricing in early 2026 [60]

Fourth Quarter 2025 Financial Results February 4, 2026 2 . 3 | | Fourth Quarter | | | CY 2025 | | | | | --- | --- | --- | --- | --- | --- | --- | --- | | $ in millions | 4Q 2025 | 4Q 2024 | Change | $ in millions | CY 2025 | CY 2024 | Change | | Net Sales | $407 | $371 | 10% | Net Sales | $1,696 | $1,567 | 8% | | Growth from: | | | | Growth from: | | | | | Core (1) | | | 10% | Core (1) | | | 8% | | Adjusted EBITDA(1) | $104 | $91 | 14% | Adjusted EBITDA(1) | $442 | $390 | 13% | | % of Sales | 25.6% | 24.6% ...

Financial Performance - Zurn Elkay Water Solutions reported fourth quarter net sales of $407 million, a 10% increase from $371 million in the same quarter last year[6]. - Adjusted EBITDA for the fourth quarter was $104 million, representing 25.6% of net sales, up from $91 million or 24.6% of net sales in the prior year[10]. - Full year 2025 net sales reached $1,696 million, an 8% increase from $1,567 million in 2024, with adjusted EBITDA of $442 million and a margin of 26.1%[6]. - Income from continuing operations for the fourth quarter was $42 million, with diluted EPS of $0.24, compared to $36 million and $0.21 in the prior year[6]. - Net income for the three months ended December 31, 2025, was $42.1 million, an increase of 15.7% compared to $36.4 million for the same period in 2024[39]. - Adjusted EBITDA for the twelve months ended December 31, 2025, reached $442.2 million, up 13.3% from $390.4 million in 2024[39]. - Adjusted net income for the twelve months ended December 31, 2025, was $260.8 million, representing a 16.5% increase from $223.9 million in 2024[41]. - Net income for the twelve months ended December 31, 2025, was $198.0 million, up 23.5% from $160.2 million in 2024[25]. - Basic net income per share for continuing operations increased to $1.14 for the twelve months ended December 31, 2025, compared to $0.92 in 2024[25]. - The diluted earnings per share for the twelve months ended December 31, 2025, was $1.52, up from $1.28 in 2024, marking an 18.8% increase[41]. Cash Flow and Debt - The company generated record free cash flow of $317 million in 2025, with a net debt leverage ratio of 0.4x as of December 31, 2025[6]. - Free cash flow for the twelve months ended December 31, 2025, was $316.6 million, an increase from $271.7 million in 2024[43]. - Cash provided by operating activities for the twelve months ended December 31, 2025, was $346.5 million, compared to $293.5 million in 2024, reflecting an 18.1% increase[50]. - The company’s long-term debt as of December 31, 2025, was $495.6 million, slightly up from $494.8 million in 2024[48]. Stockholder Returns - The company repurchased $160 million of common stock and increased its quarterly dividend by 22% year over year[5]. Future Outlook - Zurn Elkay plans to achieve mid-single digit core sales growth and approximately $335 million in free cash flow for the full year 2026[8]. - For the first quarter of 2026, Zurn Elkay expects core sales growth of 7% to 8% and adjusted EBITDA margins of approximately 25.5% to 26.0%[8]. Tax and Adjustments - The provision for income taxes for the twelve months ended December 31, 2025, was $63.9 million, with an effective tax rate of 24.9%[30]. - Total adjustments for non-GAAP results for the twelve months ended December 31, 2025, amounted to $89.7 million[30]. - The company reported a restructuring charge of $9.6 million for the twelve months ended December 31, 2025[30]. Assets and Equity - Total assets as of December 31, 2025, were $2,679.4 million, a slight increase from $2,648.5 million in 2024[48]. - The company reported a total stockholders' equity of $1,603.3 million as of December 31, 2025, compared to $1,586.8 million in 2024[48]. Profitability Metrics - Gross profit for the twelve months ended December 31, 2025, reached $764.8 million, representing an 8.1% increase from $707.0 million in 2024[25]. - Income from operations for the three months ended December 31, 2025, was $60.4 million, a 22.6% increase compared to $49.3 million in the same period of 2024[25]. - Non-GAAP net income for the three months ended December 31, 2025, was $61.6 million, reflecting an adjustment of $19.5 million[27]. - The weighted-average number of diluted shares outstanding for the three months ended December 31, 2025, was 170,296 thousand[25]. - The company incurred $40.6 million in stock-based compensation expense for the twelve months ended December 31, 2025, compared to $37.9 million in 2024[50].

Group 1 - Zurn Elkay Water Solutions Corporation declared a quarterly common stock dividend of $0.11 per share, payable on March 6, 2026, to stockholders of record as of February 20, 2026 [1] - The company is recognized as one of America's Most Responsible Companies and one of America's Greenest Companies by Newsweek, as well as one of the World's Best Companies for Sustainable Growth by TIME [2] - Zurn Elkay Water Solutions is a growth-oriented, pure-play water management business that offers a broad sustainable product portfolio aimed at improving health, hydration, human safety, and the environment [2] Group 2 - The product portfolio includes professional-grade water safety and control products, flow systems products, hygienic and environmental products, and filtered drinking water products for both public and private spaces [2]

Core Viewpoint - The U.S. stock market experienced a decline primarily due to Nvidia's ban on H200 AI chips in China, which negatively impacted major technology stocks and bank earnings [2][10]. Market Overview - The three major U.S. stock indices fell on January 14, 2026, with Nvidia's decline leading the way, affecting other technology stocks [2]. - Major banks like Citigroup and Wells Fargo reported disappointing fourth-quarter results, contributing to the market's downturn [2]. Investment Strategy - Investors are advised to favor low-leverage stocks over high-growth technology stocks to mitigate risks associated with high-debt companies [3][10]. - Recommended companies include REV Group (REVG), TechnipFMC (FTI), Resmed (RMD), Zurn Elkay Water Solutions (ZWS), and SEI Investments (SEIC), all of which exhibit low leverage and solid growth prospects [3][10]. Significance of Low-Leverage Stocks - Leverage refers to borrowing capital for operations and expansion, typically through debt financing, which can pose risks if not managed properly [5][6]. - Companies with excessive reliance on debt financing may face significant losses during economic downturns, making low-leverage stocks a safer investment choice [6][7]. Debt Analysis - The debt-to-equity ratio is a key metric for assessing a company's financial risk, with lower ratios indicating better solvency [8]. - Investors should focus on stocks with solid earnings growth and low debt-to-equity ratios, especially during earnings seasons [8][10]. Stock Recommendations - **REV Group (REVG)**: Reported a 11.1% year-over-year increase in net sales to $664.4 million and a 62.7% surge in adjusted earnings per share [14][15]. - **TechnipFMC (FTI)**: Awarded a significant contract by BP, with a projected revenue increase of 6.6% for 2026 [16][17]. - **Resmed (RMD)**: Received FDA clearance for an AI-enabled medical device, with an expected 8.4% revenue growth for 2026 [18][19]. - **Zurn Elkay Water Solutions (ZWS)**: Recognized as one of America's Most Responsible Companies, with a projected revenue increase of 5.3% for 2026 [20][21]. - **SEI Investments (SEIC)**: Completed multiple client projects, with a forecasted revenue growth of 9.3% for 2026 [22][23].

Core Viewpoint - Investors in the Waste Removal Services sector should consider Veolia Environnement SA (VEOEY) and Zurn Water (ZWS) to determine which stock offers better value at present [1] Group 1: Company Rankings and Performance - VEOEY has a Zacks Rank of 2 (Buy), while ZWS has a Zacks Rank of 3 (Hold) [3] - VEOEY has shown a stronger improvement in its earnings outlook compared to ZWS [3] Group 2: Valuation Metrics - VEOEY has a forward P/E ratio of 12.73, significantly lower than ZWS's forward P/E of 27.88 [5] - VEOEY's PEG ratio is 1.18, while ZWS has a PEG ratio of 1.99, indicating VEOEY may be more favorably valued considering expected EPS growth [5] - VEOEY's P/B ratio is 1.78, compared to ZWS's P/B of 4.85, suggesting VEOEY is undervalued relative to its book value [6] - Based on these metrics, VEOEY holds a Value grade of B, while ZWS has a Value grade of C, indicating VEOEY is the better option for value investors [6]