Key Highlights

  • Net sales were $495.1 million, up 8.7% from $455.4 million, with core sales up 7%.
  • Adjusted diluted EPS was $0.52, up from $0.43, while GAAP diluted EPS was $0.45 versus $0.35 from continuing operations.
  • Adjusted EBITDA was $140.1 million, with the margin rising to 28.3% from 26.8%.
  • Fourth-quarter net sales are guided to $430 million to $437 million and adjusted EBITDA to $120 million to $123 million.
  • Third-quarter free cash flow was $109.6 million, and net leverage was 0.4 times.

Zurn Elkay Earnings: Why Did Adjusted EPS Jump 21% and What Is the Q4 Outlook?

Zurn Elkay Water Solutions (NYSE:ZWS) reported third-quarter results on Tuesday, October 27, with adjusted diluted EPS of $0.52, up about 21% from $0.43 a year earlier. As screened, that compared with a $0.50 estimate, a 4.21% surprise. GAAP diluted EPS from continuing operations was $0.45, up from $0.35.

Net sales were $495.1 million, up 8.7% from $455.4 million. Core sales rose 7%, with growth in nearly all product categories, and the Intellihot acquisition added about 2%. For the fourth quarter, the company guided net sales to $430 million to $437 million and adjusted EBITDA to $120 million to $123 million, and it expects full-year free cash flow above $350 million, excluding tariff refunds.

Zurn Elkay makes water safety and control, flow systems, hygienic and environmental, and filtered drinking water products. The release reported no segment results and gave no full-year sales, EBITDA or EPS guidance.

Zurn Elkay Margins: What Drove a 490 Basis Point Jump in Operating Margin?

Gross profit was $245.8 million, against $200.7 million a year earlier, lifting the gross margin to about 49.7% from 44.1% (calculated). Income from operations was $108.2 million, up from $77.5 million, and the operating margin rose 490 basis points year over year, which management credited to product mix, productivity under the Zurn Elkay Business System, and supply chain repositioning.

Adjusted EBITDA rose about 15% to $140.1 million, and the adjusted margin was 28.3% versus 26.8%. Adjusted net income was $86.8 million, up from $74.8 million. Selling, general and administrative expense rose to $121.0 million from $106.7 million.

For the first nine months, net sales were $1.42 billion, up 10.1%, and adjusted EBITDA was $392.1 million.

Zurn Elkay Cash and Capital: How Much Went Back to Shareholders?

Cash from operations was $112.2 million in the quarter, up from $101.3 million, and capital spending was $9.8 million. Free cash flow was $109.6 million, and net IEEPA tariff refunds in the quarter were $7.2 million after $8.7 million of taxes. Year to date, net tariff refunds total $40.4 million, and the company excluded pre-tax refunds of $49.1 million from adjusted results.

The company repurchased about 0.7 million shares for $35 million in the quarter and $134.7 million over nine months. It raised its annual dividend 18% to $0.52 per share. Net leverage was 0.4 times, with cash of $307.1 million against total debt of $500.3 million.

Intellihot closed during the quarter, and nine-month acquisition spending was $107.3 million. Management also pointed to entry into the digital master mixing valve market and about $400 million of expanded served markets in 2026.

Zurn Elkay Conservative Stance: What to Watch After the October 28 Call?

Management said it is taking a conservative view of its assumptions given uncertainty in its served markets and the broader economy, while remaining aggressive in its actions. The investor call was scheduled for Wednesday, October 28, at 8:30 a.m. Eastern.

Watch the fourth-quarter guide against the third quarter's $495.1 million, the durability of the 28.3% margin, and further tariff refund receipts.