Zurn Water Solutions Corporation ((ZWS)) has held its Q1 earnings call. Read on for the main highlights of the call.
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Zurn Water Solutions Corporation’s recent earnings call conveyed a balanced sentiment, highlighting robust financial performance and strategic supply chain adjustments amidst challenges from tariffs and some market softness.
Strong Organic Growth and Improved Margins
Zurn Elkay Water Solutions reported a commendable 5% organic growth alongside a 110 basis points year-over-year improvement in EBITDA margins. This performance underscores the company’s strong operational capabilities and effective management strategies.
Share Repurchase and Low Leverage
The company showcased its financial strength by ending the quarter with a leverage ratio of 0.9 times and repurchasing $77 million worth of shares. This move reflects a commitment to enhancing shareholder value and maintaining financial health.
Sustainability Achievements
Zurn Elkay’s dedication to sustainability was evident as it delivered 600 million gallons of filtered water in Q1, marking a 33% increase over the previous year. This achievement highlights the company’s ongoing efforts in environmental responsibility.
Supply Chain Resilience
In a strategic move, Zurn Elkay has significantly reduced its reliance on China, aiming for less than 2-3% of its cost of goods sold (COGS) from China by the end of 2026. This initiative demonstrates the company’s proactive approach to supply chain management.
Tariff Impacts and Supply Chain Challenges
Despite potential cost increases due to tariffs, estimated between $45 million to $55 million for 2025, Zurn Elkay is prepared to manage these challenges through strategic supply chain adjustments and pricing strategies.
Softness in Residential and Commercial Segments
While non-residential markets experienced mid-single-digit growth, the company noted some softness in residential and certain commercial segments, indicating areas that may require strategic focus.
Forward-Looking Guidance
For the first quarter of fiscal year 2025, Zurn Elkay reported a 5% organic growth and a 110 basis points improvement in EBITDA margins. Sales totaled $389 million, with core growth at 5%. Looking ahead to the second quarter, the company anticipates core sales growth in the low to mid-single digits and expects adjusted EBITDA margins to range between 25.5% and 26%. Despite tariff challenges, Zurn Elkay remains confident in its ability to maintain a price-cost positive position and affirmed its full-year guidance.
In summary, Zurn Water Solutions Corporation’s earnings call highlighted a strong financial performance with strategic initiatives in sustainability and supply chain management. Despite facing challenges such as tariffs and market softness, the company remains optimistic about its growth prospects and competitive positioning.