Financial Performance - Core sales increased by 11% year-over-year in Q3 2025[5,6] - Adjusted EBITDA increased by 16% year-over-year in Q3 2025, reaching $122 million[5,6] - Adjusted EBITDA margin was 26.8% in Q3 2025, an increase of 120 bps year-over-year[5,6] - Free cash flow was $94 million in Q3 2025[5] - Year-to-date net sales reached $1,289 million, an 8% increase compared to the same period in 2024[7] - Year-to-date Adjusted EBITDA reached $338 million, a 13% increase compared to the same period in 2024[7] Strategic Developments - Quarterly dividend increased by 22%[5] - The company completed the U.S pension plan termination[5] - Authorized share buyback increased to $500 million[5] - Share repurchases in Q3 2025 amounted to $25 million, representing approximately 600k shares[5] Sustainability Impact - 86% of revenue comes from products with sustainable attributes[10] - Products saved 24.7 million gallons of water[10] - Products delivered 1.8 billion gallons of safer, cleaner filtered water[10] - Products prevented 14.6 billion single-use plastic water bottles[10]

Core Insights - Carillon Eagle Small Cap Growth Fund's third-quarter 2025 investor letter indicates a sustained upward rally in equity markets, driven by AI acceleration, reduced inflationary impacts from tariffs, and prospects for interest rate cuts from the U.S. Federal Reserve [1] - The Russell 2000® Growth Index increased by 12.19% in the quarter, slightly underperforming the Russell 2000 Value Index, which rose by 12.60% [1] Company Highlights - Zurn Elkay Water Solutions Corporation (NYSE:ZWS) is identified as a key stock in the fund's portfolio, with a one-month return of -1.65% and a 52-week gain of 28.22% [2] - As of October 28, 2025, Zurn Elkay's stock closed at $46.03 per share, with a market capitalization of $7.712 billion [2] - The company has outperformed broader non-residential construction trends and has effectively navigated tariff challenges, as noted in its recent earnings report, which exceeded investor expectations [3] - Recent product launches and favorable legislative trends are expected to positively impact Zurn Elkay's core institutional end markets, providing growth momentum [3] Market Position - Zurn Elkay Water Solutions Corporation is not among the 30 most popular stocks among hedge funds, with 24 hedge fund portfolios holding the stock at the end of the second quarter, down from 26 in the previous quarter [4] - While Zurn Elkay is recognized for its potential, certain AI stocks are considered to offer greater upside potential and less downside risk [4]

Core Insights - Zurn Water (ZWS) reported quarterly earnings of $0.43 per share, exceeding the Zacks Consensus Estimate of $0.40 per share, and showing an increase from $0.34 per share a year ago, resulting in an earnings surprise of +7.50% [1] - The company achieved revenues of $455.4 million for the quarter ended September 2025, surpassing the Zacks Consensus Estimate by 2.86% and up from $410 million year-over-year [2] - Zurn Water shares have increased approximately 25% year-to-date, outperforming the S&P 500's gain of 16.9% [3] Earnings Performance - Over the last four quarters, Zurn Water has consistently surpassed consensus EPS estimates [2] - The current consensus EPS estimate for the upcoming quarter is $0.32 on revenues of $389.94 million, and for the current fiscal year, it is $1.44 on revenues of $1.67 billion [7] Industry Outlook - The Waste Removal Services industry, to which Zurn Water belongs, is currently ranked in the bottom 35% of over 250 Zacks industries, indicating potential challenges ahead [8] - Another company in the same industry, Casella (CWST), is expected to report quarterly earnings of $0.34 per share, reflecting a year-over-year increase of +25.9% [9]

Financial Performance - Net sales for the three months ended September 30, 2025, were $455.4 million, an increase of 11.1% compared to $410.0 million for the same period in 2024[112]. - Income from operations for the three months ended September 30, 2025, was $77.5 million, reflecting a 10.4% increase from $70.2 million in the prior year[113]. - Net income for the three months ended September 30, 2025, was $61.8 million, compared to $43.5 million for the same period in 2024, resulting in diluted net income per share of $0.36[118]. - For the nine months ended September 30, 2025, net sales were $1,288.7 million, representing a year-over-year increase of 7.8% from $1,195.8 million[119]. - Income from operations for the nine months ended September 30, 2025, was $218.5 million, an increase of 11.9% from $195.3 million in the same period of 2024[120]. - Net income for the nine months ended September 30, 2025, was $155.9 million, an increase of 26% from $123.8 million for the same period in 2024[125]. - Diluted net income per share increased to $0.91 for the nine months ended September 30, 2025, compared to $0.71 for the same period in 2024[125]. - Adjusted EBITDA for the nine months ended September 30, 2025, was $338.1 million, up from $299.3 million for the same period in 2024, reflecting a 13% increase[131]. Tax and Other Income - The effective income tax rate for the three months ended September 30, 2025, was 24.7%, down from 28.0% in the prior year[116]. - Other income for the three months ended September 30, 2025, was $8.7 million, compared to an expense of $(1.5) million in the same period of 2024, driven by the settlement of the U.S. defined benefit pension plan[115]. - The company recognized a curtailment gain of $0.7 million from the pension plan freeze in Q1 2025 and a pre-tax settlement gain of $10.0 million from exiting the pension plan[106]. Debt and Liquidity - The Net First Lien Leverage Ratio as of September 30, 2025, was 0.63 to 1.00, indicating strong compliance with debt covenants[132]. - Total indebtedness as of September 30, 2025, was $496.4 million, with a term loan of $476.1 million and finance leases of $20.3 million[143]. - The company had $260.1 million in cash and cash equivalents as of September 30, 2025, along with $189.9 million of additional borrowing capacity under its revolving credit facility[138]. - The company believes its liquidity resources are adequate for expected short-term and long-term needs[139]. Cash Flow - Cash provided by operating activities was $254.8 million for the nine months ended September 30, 2025, compared to $229.9 million for the same period in 2024, representing an increase of 11%[140]. - Cash used for investing activities was $20.7 million during the nine months ended September 30, 2025, compared to $11.1 million for the same period in 2024[141]. - Cash used for financing activities increased to $174.1 million for the nine months ended September 30, 2025, from $165.8 million in the same period of 2024[142]. Interest and Restructuring - Interest expense, net decreased to $7.1 million for the three months ended September 30, 2025, down from $8.3 million in the prior year, primarily due to lower interest rates[114]. - Restructuring charges for the three months ended September 30, 2025, totaled $1.8 million, compared to $2.7 million in the same period of 2024[111]. Market Risk - The company is exposed to market risk from changes in foreign currency exchange rates and interest rates[145]. - Exposure to these risks is managed through normal operating and financing activities, as well as derivative financial instruments[145]. - The company utilizes foreign currency forward contracts to cover certain known foreign currency transactional risks[145]. - Historically, the company has entered into interest rate derivatives to manage interest rate fluctuations[145].

Financial Performance - Third quarter net sales were $455 million, an 11% increase from $410 million in the same quarter last year[5] - Adjusted EBITDA for the third quarter was $122 million, representing a 16% growth year-over-year and a margin of 26.8%[5][7] - Net income from continuing operations was $60 million, with diluted EPS increasing to $0.35 from $0.25 in the prior year[5] - Net income for the three months ended September 30, 2025, was $61.8 million, a 42.0% increase from $43.5 million in the same period of 2024[22] - Basic net income per share for continuing operations was $0.89 for the nine months ended September 30, 2025, compared to $0.71 in the same period of 2024, an increase of 25.4%[22] - Adjusted net income for the nine months ended September 30, 2025, was $199.2 million, compared to $167.3 million for the same period in 2024, marking a 19.0% increase[38] - The company reported a total comprehensive income of $53.1 million for the three months ended September 30, 2025, compared to $44.1 million for the same period in 2024, a 20.3% increase[42] Cash Flow and Debt - Free cash flow for the quarter was $94 million, resulting in a net debt leverage ratio of 0.6x[5] - Free cash flow for the nine months ended September 30, 2025, was $234.1 million, compared to $217.2 million for the same period in 2024, indicating a 7.9% increase[40] - Cash provided by operating activities for the nine months ended September 30, 2025, was $254.8 million, compared to $229.9 million for the same period in 2024, a 10.9% increase[46] - The company’s long-term debt as of September 30, 2025, was $495.5 million, slightly up from $494.8 million as of December 31, 2024[44] Sales and Growth Projections - For the fourth quarter, core sales growth is expected to be in the high-single digit range, with adjusted EBITDA projected between $99 million and $102 million[6] - The full year adjusted EBITDA outlook has been raised to between $437 million and $440 million, up from the previous guidance of $420 million to $430 million[6] - Core sales growth was driven by improvements across all product categories, maintaining consistent income from operations as a percentage of net sales[6] Dividend and Shareholder Returns - The company raised its annual dividend by 22% to $0.44 per share and increased share repurchase authorization to $500 million[4] Operational Changes - The company completed the termination of its US Pension Plan during the quarter[5] - The company incurred restructuring and similar charges of $1.8 million for the three months ended September 30, 2025, down from $2.7 million in the same period of 2024[24] Tax and Adjustments - The effective tax rate for the three months ended September 30, 2025, was 24.5%, compared to 26.9% for the same period in 2024[24] - Total adjustments for non-GAAP reconciliation for the nine months ended September 30, 2025, amounted to $63.7 million, compared to $58.4 million in the prior year[27]

Core Points - Zurn Elkay Water Solutions Corporation has been recognized by Newsweek as one of America's Greenest Companies for 2026, marking its inclusion for the second consecutive year [1] Group 1 - The recognition highlights 450 U.S.-based companies that have made significant efforts to minimize their negative environmental impact [1] - Zurn Elkay aims to promote a sustainable future for clean water, emphasizing its importance as a natural resource [1]

Core Insights - Elkay introduces the Liv EZ Built-In Filtered Water Dispenser, designed to provide commercial-grade filtered water for home use, enhancing hydration convenience and style [2][4][7] Product Features - The Liv EZ dispenser is designed for various home settings, including kitchens, mudrooms, playrooms, and home gyms, allowing for easy installation wherever a water line is available [3][5] - It features a minimalist design made from premium glass and stainless steel, equipped with an LED light and a high flow rate for quick filling [4][6] - The dispenser includes a "Bottles Saved" counter to track environmental impact, promoting sustainable hydration practices [4] Filtration Technology - The Liv EZ utilizes Elkay's WaterSentry® 71300C filter, which effectively reduces contaminants such as lead, forever chemicals, microplastics, and chlorine taste and odor [6] - Each filter has a lifespan of up to one year and meets NSF/ANSI standards 42, 53, 372, and 401, ensuring high-quality drinking water [6] Company Background - Elkay, founded in 1920 and part of Zurn Elkay Water Solutions since 2022, is recognized as America's leading producer of filtered bottle filling stations and sinks [8] - The company has received accolades for its environmental responsibility and sustainability efforts, being named one of America's Most Responsible and Greenest Companies by Newsweek [8]

Core Viewpoint - Momentum investing focuses on following a stock's recent price trends, aiming to buy high and sell even higher, with the expectation that established trends will continue [1] Company Overview: Zurn Water (ZWS) - Zurn Water currently holds a Momentum Style Score of B and a Zacks Rank of 1 (Strong Buy), indicating strong potential for outperformance [2][3] - The stock has shown significant price appreciation, with a 31.98% increase over the past quarter and a 42.01% rise over the last year, outperforming the S&P 500's gains of 9.25% and 18.95% respectively [6] Price Performance - Over the past week, ZWS shares increased by 1.41%, while the Zacks Waste Removal Services industry remained flat; the monthly price change for ZWS is 4.45%, compared to the industry's 1.09% [5] - The average 20-day trading volume for ZWS is 903,649 shares, which serves as a bullish indicator when combined with rising stock prices [7] Earnings Outlook - In the last two months, three earnings estimates for ZWS have been revised upwards, raising the consensus estimate from $1.35 to $1.44 [9] - For the next fiscal year, three estimates have also moved higher, with no downward revisions noted [9] Conclusion - Given the strong performance metrics and positive earnings outlook, Zurn Water is positioned as a promising investment opportunity with a Momentum Score of B [11]

Core Viewpoint - Zurn Water (ZWS) has been upgraded to a Zacks Rank 1 (Strong Buy), indicating a positive outlook on its earnings estimates, which is a significant factor influencing stock prices [1][3]. Earnings Estimates and Stock Performance - The Zacks rating system is based on changes in earnings estimates, which are strongly correlated with near-term stock price movements [4][6]. - Zurn Water is expected to earn $1.44 per share for the fiscal year ending December 2025, with no year-over-year change, but the Zacks Consensus Estimate has increased by 2.4% over the past three months [8]. Institutional Investor Influence - Institutional investors utilize earnings estimates to determine the fair value of stocks, leading to buying or selling actions that affect stock prices [4]. Zacks Rank System - The Zacks Rank system classifies stocks into five groups based on earnings estimates, with Zacks Rank 1 stocks historically generating an average annual return of +25% since 1988 [7]. - Only the top 5% of Zacks-covered stocks receive a "Strong Buy" rating, indicating superior earnings estimate revisions [10].

Financial Data and Key Metrics Changes - The company reported second quarter sales of $445 million, reflecting an 8% organic growth year over year [10] - Adjusted EBITDA for the second quarter was $118 million, with an adjusted EBITDA margin of 26.5%, marking a 120 basis point year-over-year expansion [12] - The company ended the quarter with a net debt leverage of 0.7 times, the lowest since becoming public, and free cash flow exceeded $100 million for the first time, totaling $102 million [13] Business Line Data and Key Metrics Changes - The non-residential market remains positive, while the residential market is experiencing some softness [10] - Approximately $8 million to $10 million of the 8% core growth came from customers ordering ahead of price increases, with an additional point from tariff-related price increases [11] Market Data and Key Metrics Changes - The company anticipates core sales growth of at least 5% year over year for 2025, with adjusted EBITDA projected between $420 million and $430 million [25] - The residential market is noted to be softer compared to institutional and commercial markets, which remain stable [40] Company Strategy and Development Direction - The company is focused on sustainability initiatives, having delivered 1.2 billion gallons of filtered drinking water, a 21% increase from the previous year [14] - The introduction of the new LK Pro filtration system aims to enhance competitive advantage and address aging infrastructure issues [17][20] - The company is committed to reducing direct material supply chain exposure from China to less than 2% to 3% by 2026 [22] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating the current global tariff environment and raised the outlook for top-line growth, EBITDA, and free cash flow for the year [7][8] - The company is taking a quarter-by-quarter approach to its outlook, reflecting a cautious but optimistic view on future performance [8] Other Important Information - The company has made significant philanthropic contributions, exceeding $1.4 million in total giving for the year, which is part of its community engagement efforts [15] - The company has improved transparency in its sustainability metrics reporting [16] Q&A Session Summary Question: Can you provide color on Q2 growth by product category? - Management noted significant unit volume growth and share gains driven by innovation in drinking water and flow systems [30][32] Question: What is the status of the M&A pipeline? - Management indicated a robust process for identifying targets and cultivating relationships, with a focus on both acquisitions and organic growth [33][35] Question: What is the outlook for end markets, particularly residential? - The residential market appears softer, but institutional and commercial markets remain stable, with no significant changes in outlook [40] Question: Can you comment on the new filtration offering and its sales target? - The target for annual sales in the filtration category is expected to be raised above $100 million as the installed base grows, with double-digit growth rates anticipated [41][42] Question: How is the company managing tariff impacts? - The company expects tariff cost impacts to be between $35 million and $45 million for 2025, a reduction from previous estimates [22] Question: What is the pricing strategy in light of current market conditions? - Management indicated that total price year over year is approximately two points, with a point coming from announced price increases [79]