Zurn Water Solutions Posts Strong Earnings, Raises Margin Bar

Zurn Water Solutions Corporation ((ZWS)) has held its Q1 earnings call. Read on for the main highlights of the call.

Zurn Water Solutions opened its latest earnings call on an upbeat note, underscoring broad-based strength in its operations and finances. Management highlighted double-digit core sales growth, expanding margins, strong cash generation and a fortress-like balance sheet, while acknowledging pockets of softness in residential markets and lingering tariff uncertainty.

Top-Line Growth

Zurn reported Q1 sales of $433 million, delivering 11% core and reported year-over-year growth as both pricing and volume contributed. Management said roughly 5 percentage points came from price increases, with the balance driven by volume, and guided to still-solid Q2 core sales growth of 8%–9%.

Profitability and Margin Expansion

Profitability continued to scale faster than revenue, with adjusted EBITDA climbing 18% year over year to $116 million in Q1. The company’s adjusted EBITDA margin rose 160 basis points to 26.8%, and Zurn now expects Q2 margins of 27%–27.5%, implying 50–100 basis points of additional expansion versus last year.

Strong Cash Generation and Balance Sheet

Cash generation remained a standout as Zurn produced $43 million of free cash flow in the quarter and reaffirmed its full-year target of about $335 million. The company also repurchased $50 million of stock at roughly $47 per share and still ended Q1 with very low net leverage of 0.5 times.

Improved Liquidity and Capital Allocation Flexibility

Management emphasized a stronger liquidity position after upsizing and extending its revolving credit facility to $550 million from $200 million over a new five-year term. This added flexibility supports a balanced capital allocation plan that includes opportunistic buybacks, steady dividends and disciplined M&A that must clear strict return thresholds.

Product Momentum in Drinking Water and Filtration

Drinking water products were a key growth engine, with the installed base of filtered bottle fillers expanding at a double-digit pace and filtration growing even faster. The company’s Pro Filtration offering is seeing strong adoption and high attachment rates, which is improving the overall product mix and supporting higher margins.

Operational Improvements and Merger Synergies

Zurn continues to benefit from its Zurn Elkay Business System and ongoing continuous-improvement programs that enhance efficiency. Management noted more than $50 million of merger synergies realized so far and structural upgrades in footprint, lean practices and sourcing that are lifting margins while materially reducing exposure to tariffs.

Residential End-Market Softness

Not all end markets are firing, as management described residential demand as softer in the first quarter. The company’s planning assumptions for 2026 build in a low single-digit decline in residential, but this is expected to be partially offset by stronger nonresidential activity.

Tariff and Trade Policy Uncertainty

Executives flagged tariff and trade policy shifts as an ongoing wildcard, citing recent court decisions and evolving trade actions that could influence costs. While Zurn currently models 2026 as net price/cost positive under the existing structure, it acknowledged that future changes could be adverse and is not including any tariff refunds in its outlook.

Delayed Update to Second-Half Outlook

Reflecting a conservative stance, management chose to delay updating its second-half 2026 outlook until after it sees Q2 results and more macro clarity. The decision underscores limited visibility around tariffs and broader economic trends, even as current performance and near-term guidance remain strong.

Inflationary and Geopolitical Risks

The company also pointed to commodity and freight inflation as areas to watch, along with geopolitical tensions such as the conflict in the Middle East. These factors could pressure input costs and potentially require further pricing or other operational responses to protect margins.

Guidance and Outlook

For Q2 2026, Zurn is guiding to core sales growth of 8%–9% and an adjusted EBITDA margin of 27%–27.5%, implying another step up in profitability. Management reiterated its full-year free cash flow target of roughly $335 million and expects the modeled tariff impact in 2026 to remain net price/cost positive, though it will revisit second-half expectations after Q2.

Zurn Water Solutions’ earnings call painted a picture of a company executing well, with solid growth, expanding margins and ample financial firepower. While management is cautious on residential demand, tariffs and macro risks, the underlying momentum in higher-margin products, operational gains and cash generation left an overall impression of confidence and resilience.