Zurn Elkay Water Solutions ZWS

NYSE ZWS

$46.61 -0.72 (-1.52%)

As of: Sep 9, 2026 · 3:59 PM EDT

Key Stats

Market Cap7.79 Bn

P/E28.20

P/S4.36

Div. Yield0.01

Total Debt (Qtr)500.50 Mn

Revenue Growth (1y) (Qtr)10.46

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About

Zurn Elkay Water Solutions Corporation is a growth-oriented, pure-play water management business operating in the highly specialized building infrastructure and plumbing materials industry. The company designs, procures, manufactures, and markets a broad portfolio of specification-driven water management solutions. These solutions are engineered to improve public and private health, hydration, and human safety while benefiting the environment. Zurn Elkay provides professional-grade water safety and control products, flow systems, hygienic and environmental products, and filtered drinking water products for both institutional and commercial settings. The company has built a reputation as an innovator, providing highly engineered, mission-critical solutions for critical infrastructure applications.

The company generates revenue by selling its technically complex and highly valued products into new construction, remodeling, and retrofit projects. These products are utilized across major end markets, including education, healthcare, government, retail, office, and municipal waterworks. Since many products are project-critical, they often represent a low percentage of the total project cost but provide superior value and are essential for compliance. The core mechanism of revenue generation is selling products that meet stringent, multi-layered regulatory, building, and plumbing code requirements, which drives demand from specialized project stakeholders like architects and engineers.

The company operates through the following segments: The company operates through the following segments:

Water Safety and Control Products: This segment focuses on vital valve and water distribution control products that protect and regulate the potable and emergency water supply within a site. Products in this category include backflow preventers, fire system valves, pressure reducing valves, and thermostatic mixing valves. These products are marketed under the Zurn® and Wilkins® brands.
Flow Systems Products: This segment encompasses products designed to manage storm water and wastewater within a structure or on a site. Offerings include point drains, hydrants, fixture carrier systems, and chemical drainage systems. The company also provides wastewater pre-treatment products like oil and grease interceptors and acid neutralization systems, marketed under the Zurn®, Green Turtle®, and Wade® brands.
Hygienic and Environmental Products: This segment addresses internal finishing components required during the later stages of construction or retrofit, including faucets, flush valves, and sinks. Products include sensor-operated flush valves and heavy-duty commercial faucets, marketed under brands such as Aquaflush®, AquaSense®, and AquaSpec®. The company also offers stainless steel, quartz, and fireclay-ceramic sinks under Elkay® and JUST®.
Filtered Drinking Water Products: This segment provides filtered drinking water delivery solutions, enhancing water hygiene and sustainability. Products include filtered bottle filling stations, water fountains, and filtered faucets, sold under the Elkay® and Halsey Taylor® brand names.

Zurn Elkay maintains a leading position through its deep focus on specification-driven products and its comprehensive, proprietary product portfolio. A key competitive advantage is the ability to meet stringent, multi-jurisdictional regulatory requirements, which must be cleared through multiple organizations like NSF, UL, and IAPMO. Furthermore, the company leverages its operational philosophy, the Zurn Elkay Business System (ZEBS), which emphasizes continuous improvement and superior customer satisfaction. The strategic focus on building relationships with specifiers—architects, engineers, and contractors—ensures a high level of end-user loyalty and allows the company to participate in high-growth, non-commoditized markets.

The company's customer base is broad and diverse, serving the entire lifecycle of institutional, commercial, waterworks, and residential construction projects. The company utilizes an extensive distribution network of approximately 1,000 independent sales representatives across North America to service building owners, engineers, architects, operators, and contractors. While specific major customer names are not detailed, the services are deployed across major sectors including education, healthcare, government, retail, and municipal water and wastewater facilities. The model emphasizes serving the needs of facility operators and maintenance staff globally.

Investment Thesis

▲ Bull case

The company's deliberate strategy to shift product mix toward higher-margin retrofit/replace projects, now at a 50/50 split with new construction and targeting 55% in coming years, is creating a structural advantage that management consistently downplays despite clear evidence of resilience; this shift not only improves margins through better pricing power and customer retention but also reduces cyclical exposure to volatile new construction starts, positioning Zurn Elkay to outperform during residential softness while maintaining double-digit growth in drinking water and filtration segments as noted in the Q&A where Pro Filtration adoption remains strong with high attachment rates, indicating deeper customer integration beyond surface-level adoption metrics.
The underappreciated catalyst of operational excellence through the Zurn Elkay Business System and associate-led continuous improvement (#CI) initiatives is driving sustainable margin expansion without reliance on pricing actions, as evidenced by the 730 basis point adjusted EBITDA margin improvement over 13 quarters to 26.8% in Q1 FY26, with management explicitly stating that no single #CI initiative is material alone but thousands submitted annually create compounding gains—this organizational capability allows the company to absorb cost pressures from tariffs and inflation while maintaining pricing discipline, a point reinforced when Todd Adams noted that new product launches come at attractive margins replacing older lower-margin offerings, creating a self-reinforcing cycle of mix improvement and productivity gains that the market is overlooking in favor of short-term tariff noise.
The flexible capital structure following the revolver upsizing to $550 million with a five-year maturity provides significant dry powder for strategic M&A that management confirmed is well-developed across early, mid, and late-stage opportunities, yet they deliberately avoided highlighting specific targets during the call despite emphasizing disciplined execution and return objectives; combined with $50 million in share repurchases at ~$47/share and a net debt leverage of 0.5x, this balance sheet strength enables accretive acquisitions in adjacent water safety and control or flow systems markets that could accelerate long-term growth beyond the current mid-single-digit organic outlook, particularly as the company continues to prioritize strategic fit over auction participation, suggesting undervalued optionality in their capital allocation framework that investors are not pricing in.
The company's proactive supply chain localization, with the U.S. now as the largest sourcing origin, has materially reduced tariff exposure and transformed what could be a headwind into a price/cost positive dynamic for 2026, as Todd Adams explicitly stated they are highly confident tariff impacts will remain price/cost positive without relying on refunds or future price increases—a conservative assumption embedded in guidance that the market is ignoring given the recent Supreme Court rulings and 122/301 tariff developments; this structural advantage, combined with double-digit growth in drinking water and filtration segments and weather-assisted break-fix activity contributing ~1 point of incremental Q1 growth, creates a foundation for consistent outperformance that management's deliberate conservatism in guidance (updating second half after Q2) is failing to communicate to investors focused on near-term volatility.
The expansion of the drinking water installed base of filtered bottle fillers and the filtration segment itself—both growing at double-digit rates—represents a durable, recurring revenue stream with high customer retention and low replacement cycles, as highlighted when David Pauli noted the installed base continues to grow double-digit and Pro Filtration adoption remains strong with high attachment rates; this is further amplified by the Uvalde school district donation, which not only demonstrates real-world validation of their filtration technology in high-need communities but also expands their served market through institutional placements that could lead to follow-on orders and brand loyalty, a growth vector management discussed only in passing despite its clear alignment with long-term trends in water safety, sustainability, and public health infrastructure investment.

The company's deliberate strategy to shift product mix toward higher-margin retrofit/replace projects, now at a 50/50 split with new construction and targeting 55% in coming years, is creating a structural advantage that management consistently downplays despite clear evidence of resilience; this shift not only improves margins through better pricing power and customer retention but also reduces cyclical exposure to volatile new construction starts, positioning Zurn Elkay to outperform during residential softness while maintaining double-digit growth in drinking water and filtration segments as noted in the Q&A where Pro Filtration adoption remains strong with high attachment rates, indicating deeper customer integration beyond surface-level adoption metrics.
The underappreciated catalyst of operational excellence through the Zurn Elkay Business System and associate-led continuous improvement (#CI) initiatives is driving sustainable margin expansion without reliance on pricing actions, as evidenced by the 730 basis point adjusted EBITDA margin improvement over 13 quarters to 26.8% in Q1 FY26, with management explicitly stating that no single #CI initiative is material alone but thousands submitted annually create compounding gains—this organizational capability allows the company to absorb cost pressures from tariffs and inflation while maintaining pricing discipline, a point reinforced when Todd Adams noted that new product launches come at attractive margins replacing older lower-margin offerings, creating a self-reinforcing cycle of mix improvement and productivity gains that the market is overlooking in favor of short-term tariff noise.
The flexible capital structure following the revolver upsizing to $550 million with a five-year maturity provides significant dry powder for strategic M&A that management confirmed is well-developed across early, mid, and late-stage opportunities, yet they deliberately avoided highlighting specific targets during the call despite emphasizing disciplined execution and return objectives; combined with $50 million in share repurchases at ~$47/share and a net debt leverage of 0.5x, this balance sheet strength enables accretive acquisitions in adjacent water safety and control or flow systems markets that could accelerate long-term growth beyond the current mid-single-digit organic outlook, particularly as the company continues to prioritize strategic fit over auction participation, suggesting undervalued optionality in their capital allocation framework that investors are not pricing in.
The company's proactive supply chain localization, with the U.S. now as the largest sourcing origin, has materially reduced tariff exposure and transformed what could be a headwind into a price/cost positive dynamic for 2026, as Todd Adams explicitly stated they are highly confident tariff impacts will remain price/cost positive without relying on refunds or future price increases—a conservative assumption embedded in guidance that the market is ignoring given the recent Supreme Court rulings and 122/301 tariff developments; this structural advantage, combined with double-digit growth in drinking water and filtration segments and weather-assisted break-fix activity contributing ~1 point of incremental Q1 growth, creates a foundation for consistent outperformance that management's deliberate conservatism in guidance (updating second half after Q2) is failing to communicate to investors focused on near-term volatility.
The expansion of the drinking water installed base of filtered bottle fillers and the filtration segment itself—both growing at double-digit rates—represents a durable, recurring revenue stream with high customer retention and low replacement cycles, as highlighted when David Pauli noted the installed base continues to grow double-digit and Pro Filtration adoption remains strong with high attachment rates; this is further amplified by the Uvalde school district donation, which not only demonstrates real-world validation of their filtration technology in high-need communities but also expands their served market through institutional placements that could lead to follow-on orders and brand loyalty, a growth vector management discussed only in passing despite its clear alignment with long-term trends in water safety, sustainability, and public health infrastructure investment.

▼ Bear case

Despite management's confidence in tariff resilience, the company's outlook remains highly sensitive to unresolved Section 122 and potential Section 301 tariff developments, with Todd Adams acknowledging they are projecting "likely net adverse changes" from these measures, yet the assumption that impacts will be price/cost positive without refunds or future price increases relies on aggressive cost absorption and supply chain adjustments that may not be sustainable if tariff rates increase significantly or if retaliatory measures disrupt key input markets—a risk underscored when Nathan Jones from Stifel pressed for incremental growth impact details and received only vague assurances about U.S. sourcing dominance, leaving investors without concrete visibility into margin protection under worsening trade scenarios.
The residential end market continues to show persistent softness, with management admitting it remains "challenged" and contributing to the offset of nonresidential growth, yet they provided no specific timeline for recovery or actionable strategies beyond general market observations, and when questioned about end market trends, David Pauli explicitly stated there would be "no change to that guidance framework" of low single-digit institutional growth, flat commercial, and low single-digit residential decline—this lack of visibility into a potential inflection point in residential demand, combined with the company's historical reliance on new construction for retrofit pipeline feeding, suggests the 50/50 mix shift may not be sustainable if new construction remains weak, undermining the long-term viability of their aftermarket growth thesis.
While management highlights the success of the Zurn Elkay Business System and #CI initiatives, they admitted that no single initiative is material alone and that gains are aggregating from thousands of small improvements—a model that risks diminishing returns over time as the low-hanging fruit of productivity gains are exhausted, especially when Todd Adams noted that margin improvement over the past three years is a "combination of a number of drivers" including synergy capture and footprint optimization, both of which are largely complete post-Elkay merger; this raises concerns that future margin expansion will depend increasingly on pricing power or new product innovation, neither of which was demonstrated as a meaningful driver in Q1 where price contributed only 5% of the 11% core sales growth, suggesting the organizational leverage story may be maturing faster than acknowledged.
The company's M&A pipeline, while described as "well-developed," yielded no completed deals during the quarter, and when pressed on capital allocation, Todd Adams reiterated that share repurchases and dividends remain priorities, with M&A only pursued to the degree it meets strategic and return hurdles—a cautious approach that may delay meaningful growth acceleration, especially given the lack of specific targets or timelines shared during the call, and when Michael Halloran from Baird asked about growth adjacencies impacting late 2026 or 2027, Todd Adams deflected by saying "nothing that we're going to share at this point," creating uncertainty about whether these initiatives will materialize in time to offset any slowdown in core end markets or if they remain speculative longer-term bets.
Although the company reported strong free cash flow generation of $43 million in Q1 and repurchased $50 million of stock, the net debt leverage of 0.5x includes the impact of those repurchases, meaning the underlying operational leverage may be higher than reported, and when considering the $335 million full-year free cash flow outlook, the $50 million Q1 repurchase represents nearly 15% of annual FCF allocated to buybacks rather than debt reduction or reinvestment—a capital allocation choice that could limit financial flexibility if operating performance deteriorates, particularly given management's deliberate decision to pause full-year outlook updates until after Q2, which signals uncertainty about second-half performance despite their public confidence in managing through tariff dynamics.

Despite management's confidence in tariff resilience, the company's outlook remains highly sensitive to unresolved Section 122 and potential Section 301 tariff developments, with Todd Adams acknowledging they are projecting "likely net adverse changes" from these measures, yet the assumption that impacts will be price/cost positive without refunds or future price increases relies on aggressive cost absorption and supply chain adjustments that may not be sustainable if tariff rates increase significantly or if retaliatory measures disrupt key input markets—a risk underscored when Nathan Jones from Stifel pressed for incremental growth impact details and received only vague assurances about U.S. sourcing dominance, leaving investors without concrete visibility into margin protection under worsening trade scenarios.
The residential end market continues to show persistent softness, with management admitting it remains "challenged" and contributing to the offset of nonresidential growth, yet they provided no specific timeline for recovery or actionable strategies beyond general market observations, and when questioned about end market trends, David Pauli explicitly stated there would be "no change to that guidance framework" of low single-digit institutional growth, flat commercial, and low single-digit residential decline—this lack of visibility into a potential inflection point in residential demand, combined with the company's historical reliance on new construction for retrofit pipeline feeding, suggests the 50/50 mix shift may not be sustainable if new construction remains weak, undermining the long-term viability of their aftermarket growth thesis.
While management highlights the success of the Zurn Elkay Business System and #CI initiatives, they admitted that no single initiative is material alone and that gains are aggregating from thousands of small improvements—a model that risks diminishing returns over time as the low-hanging fruit of productivity gains are exhausted, especially when Todd Adams noted that margin improvement over the past three years is a "combination of a number of drivers" including synergy capture and footprint optimization, both of which are largely complete post-Elkay merger; this raises concerns that future margin expansion will depend increasingly on pricing power or new product innovation, neither of which was demonstrated as a meaningful driver in Q1 where price contributed only 5% of the 11% core sales growth, suggesting the organizational leverage story may be maturing faster than acknowledged.
The company's M&A pipeline, while described as "well-developed," yielded no completed deals during the quarter, and when pressed on capital allocation, Todd Adams reiterated that share repurchases and dividends remain priorities, with M&A only pursued to the degree it meets strategic and return hurdles—a cautious approach that may delay meaningful growth acceleration, especially given the lack of specific targets or timelines shared during the call, and when Michael Halloran from Baird asked about growth adjacencies impacting late 2026 or 2027, Todd Adams deflected by saying "nothing that we're going to share at this point," creating uncertainty about whether these initiatives will materialize in time to offset any slowdown in core end markets or if they remain speculative longer-term bets.
Although the company reported strong free cash flow generation of $43 million in Q1 and repurchased $50 million of stock, the net debt leverage of 0.5x includes the impact of those repurchases, meaning the underlying operational leverage may be higher than reported, and when considering the $335 million full-year free cash flow outlook, the $50 million Q1 repurchase represents nearly 15% of annual FCF allocated to buybacks rather than debt reduction or reinvestment—a capital allocation choice that could limit financial flexibility if operating performance deteriorates, particularly given management's deliberate decision to pause full-year outlook updates until after Q2, which signals uncertainty about second-half performance despite their public confidence in managing through tariff dynamics.

Customer Breakdown of Revenue (2025)

Peer group

Peer Comparison

Companies in the Building Products

S.No.	Ticker	Company	match	Market Cap	P/E	P/S	Total Debt (Qtr)
1	OTIS	Otis Worldwide Corp	primary	26.54 Bn	16.82	1.78	9.62 Bn
2	JHIUF	James Hardie Industries plc	primary	17.99 Bn	122.13	3.33	4.32 Bn
3	MAS	Masco Corp /De/	primary	13.79 Bn	14.72	1.81	3.25 Bn
4	CSL	Carlisle Companies Inc	primary	13.57 Bn	18.73	2.66	2.89 Bn
5	ALLE	Allegion plc	primary	13.01 Bn	19.76	3.03	2.03 Bn
6	OC	Owens Corning	primary	10.35 Bn	-15.49	1.05	6.13 Bn
7	WMS	Advanced Drainage Systems, Inc.	primary	10.08 Bn	22.32	3.13	1.61 Bn
8	AYI	Acuity Inc. (De)	primary	9.72 Bn	20.58	2.11	0.70 Bn

Zurn Elkay Water Solutions ZWS

About

Investment Thesis

Geographical Breakdown of Revenue (2025)

Customer Breakdown of Revenue (2025)

Peer Comparison

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