Zurn Elkay Water Solutions Corporation (NYSE:ZWS) closed its fiscal 2025 on a strong note, delivering fourth-quarter results that surpassed analyst expectations on the top and bottom lines. The company's performance, coupled with a robust outlook for the coming year, underscores the steady demand for its water management solutions and its ability to translate sales growth into expanding profitability.
Earnings and Revenue Performance Versus Estimates
The company's fourth-quarter results for calendar year 2025 demonstrated clear operational execution. Net sales reached $407.2 million, a 9.8% increase over the prior-year period and modestly ahead of the analyst consensus estimate of approximately $405.0 million. This growth was driven entirely by a 10% increase in core sales, which excludes the impact of foreign currency and M&A activity.
Profitability metrics also exceeded expectations. Adjusted earnings per share (EPS) came in at $0.36, outpacing the Wall Street estimate of $0.34. This performance was supported by significant margin expansion, as the company's adjusted EBITDA margin improved by 100 basis points year-over-year to 25.6%.
Key Q4 CY2025 Results vs. Estimates:
- Revenue: $407.2 million reported vs. ~$405.0 million estimated.
- Adjusted EPS: $0.36 reported vs. $0.34 estimated.
- Adjusted EBITDA Margin: 25.6%, up from 24.6% in Q4 CY2024.
Market Reaction and Price Action
Following the earnings release, the market's reaction has been measured but positive. The stock showed limited movement in after-hours trading immediately following the announcement. However, when viewed over recent weeks, ZWS shares have posted modest gains, suggesting a gradual and favorable reassessment by investors leading into and following the earnings report. This price action indicates that the solid results and forward guidance were largely in line with or slightly better than market expectations, reinforcing confidence in the company's trajectory rather than triggering a significant re-rating.
Full-Year Highlights and Strategic Execution
Beyond the quarterly beat, the full-year results for 2025 painted a picture of a company firing on all cylinders. Zurn Elkay achieved record annual sales of $1.70 billion, record adjusted EBITDA of $442 million, and record free cash flow of $317 million. Management highlighted the successful deployment of its "Zurn Elkay Business System" to drive productivity, resulting in a 120-basis-point expansion in full-year adjusted EBITDA margin to 26.1%.
The company's strong cash generation enabled substantial capital returns to shareholders, including $160 million in stock repurchases and $64 million in dividends. Notably, the balance sheet strengthened considerably, with net debt leverage falling to a minimal 0.4x at year-end.
Forward-Looking Guidance and Analyst Comparisons
Looking ahead, management provided clear guidance for 2026 that aligns closely with, and in some aspects may exceed, current analyst projections. The company expects mid-single-digit core sales growth for the full year, which appears consistent with the analyst sales estimate of approximately $1.80 billion. More notably, Zurn Elkay forecasts incremental adjusted EBITDA margins of approximately 35% on this sales growth and free cash flow of about $335 million.
For the first quarter of 2026, the outlook is particularly robust. The company anticipates core sales growth of 7% to 8%, which would translate to sales of roughly $425 million to $428 million. This guidance compares favorably to the current analyst consensus estimate for Q1 sales of approximately $420.6 million, suggesting the company may be positioned for a stronger start to the year than the market anticipates.
Conclusion
Zurn Elkay Water Solutions concluded a record year with a quarter that beat expectations, showcasing its ability to grow sales while significantly improving profitability. The market's steady, positive reaction reflects approval of both the strong finish to 2025 and the confident, detailed outlook for 2026. With a pristine balance sheet and a clear framework for continued margin expansion and cash generation, the company appears well-positioned to navigate the coming year.
For a detailed look at Zurn Elkay's historical earnings and future analyst estimates, you can review the data here.
Disclaimer: This article is for informational purposes only and does not constitute financial advice, nor does it recommend any investment action. Investors should conduct their own research and consult with a qualified financial advisor before making any investment decisions.
