Zurn Water Solutions (ZWS) AI Stock Analysis

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Zurn Water Solutions

(NYSE:ZWS)

74Outperform

Zurn Water Solutions demonstrates solid financial performance and strategic growth initiatives, contributing positively to its stock score. However, technical analysis indicates a bearish trend, and valuation metrics suggest the stock may be overvalued. Strong earnings call results provide some optimism for future growth despite sector-specific challenges.

Positive Factors

Debt Management

Net debt leverage remained at an all-time low of approximately 0.8x.

Financial Performance

ZWS reported 4Q results with an adj. EPS of $0.32 compared to consensus at $0.28.

Growth Initiatives

The implementation of the Filter First initiative in Michigan is expected to contribute to future growth, with school spending anticipated to increase.

Negative Factors

Market Outlook

Commercial weakness persisting with a low single-digit outlook for the future.

Sales Growth

Core sales growth to be similar to '24 with Institutional +LSD, Waterworks +LSD, Resi ~flat, and Commercial -LSD, which is below investors' expectations of modest growth.

Zurn Water Solutions (ZWS) vs. S&P 500 (SPY)

Market Cap

$4.93B

Dividend Yield1.16%

Average Volume (3M)1.12M

Price to Earnings (P/E)31.8

Beta (1Y)1.16

Revenue Growth2.35%

EPS Growth44.23%

CountryUS

Employees2,500

SectorIndustrials

Sector Strength70

IndustryIndustrial - Pollution & Treatment Controls

Share Statistics

EPS (TTM)0.92

Shares Outstanding168,795,150

10 Day Avg. Volume1,397,229

30 Day Avg. Volume1,124,457

Financial Highlights & Ratios

PEG Ratio0.72

Price to Book (P/B)N/A

Price to Sales (P/S)3.63

Price to Cash Flow (P/CF)22.40

P/FCF Ratio20.30

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$37.80

Price Target Upside28.53% Upside

Rating ConsensusHold

Number of Analyst Covering6

Zurn Water Solutions Business Overview & Revenue Model

Company DescriptionZurn Water Solutions (ZWS) is a leading provider of water management solutions. The company operates in sectors such as plumbing, water safety, and water efficiency, offering a comprehensive range of products and services designed to manage water effectively. Key offerings include water control and safety products, hygienic and environmental solutions, and sustainable plumbing systems that are essential for residential, commercial, and industrial applications.

How the Company Makes MoneyZurn Water Solutions generates revenue through the sale of its diverse range of water management products and systems. The company's revenue model primarily involves manufacturing and distributing products such as valves, faucets, drainage systems, and advanced metering solutions to various sectors, including construction, healthcare, and education. ZWS also engages in strategic partnerships and collaborations to enhance its product offerings and market reach. Additionally, the company focuses on innovation and sustainability, ensuring that its products not only meet regulatory standards but also cater to the growing demand for eco-friendly and efficient water solutions. By addressing critical water management needs and leveraging its expertise, ZWS sustains a steady revenue stream from both new constructions and retrofitting existing systems.

Zurn Water Solutions Financial Statement Overview

Summary

Zurn Water Solutions shows strong financial performance with consistent revenue and profit growth, healthy margins, and effective cash flow management. The company maintains a stable balance sheet with manageable leverage. However, a slight decrease in total assets could be a concern for future growth.

Income Statement

Very Positive

Zurn Water Solutions has shown a consistent growth trajectory in revenue and net income over the years. The gross profit margin stabilized at 45.1% in 2024, reflecting strong cost management and pricing power. The net profit margin increased to 10.2% in 2024 from 7.4% in 2023, indicating improved profitability. Both EBIT and EBITDA margins are healthy, with EBIT margin at 15.6% and EBITDA margin at 21.0% in 2024, showcasing operational efficiency.

Balance Sheet

Positive

The company maintains a solid equity base with an equity ratio of 59.9% in 2024, implying stable financial health. The debt-to-equity ratio improved slightly to 0.35 in 2024, indicating manageable leverage. Return on equity (ROE) also improved to 10.1% in 2024, highlighting effective use of shareholders' equity to generate profits. However, the total assets have decreased, which could be a concern if it impacts future growth.

Cash Flow

Very Positive

Zurn Water Solutions exhibits strong cash flow generation capabilities. The operating cash flow increased to $293.5 million in 2024, supporting a robust free cash flow of $271.7 million. The free cash flow to net income ratio is favorable, suggesting efficient cash conversion. The operating cash flow to net income ratio of 1.83 in 2024 further confirms strong cash flow performance relative to earnings.

Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Breakdown
Income Statement		Total Revenue
1.57B	1.53B	1.28B	910.90M	562.70M
	Gross Profit
707.00M	589.40M	465.50M	373.20M	253.30M
	EBIT
244.60M	218.10M	107.10M	107.00M	81.00M
	EBITDA
328.40M	306.00M	180.60M	188.70M	147.50M
	Net Income Common Stockholders
160.20M	112.70M	61.70M	49.70M	35.00M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
198.00M	136.70M	124.80M	96.60M	62.30M
	Total Assets
2.65B	2.67B	2.86B	1.08B	3.40B
	Total Debt
551.60M	543.20M	570.10M	539.50M	0.00
	Net Debt
353.60M	406.50M	445.30M	442.90M	-62.30M
	Total Liabilities
1.06B	1.06B	1.25B	951.30M	1.96B
	Stockholders Equity
1.59B	1.60B	1.61B	126.40M	1.44B
Cash Flow		Free Cash Flow
271.70M	232.60M	89.40M	200.30M	168.00M
	Operating Cash Flow
293.50M	253.90M	97.00M	223.60M	196.30M
	Investing Cash Flow
-20.20M	-4.60M	-6.60M	-21.90M	-122.50M
	Financing Cash Flow
-207.50M	-239.20M	-61.10M	-356.20M	-409.60M

Zurn Water Solutions Technical Analysis

Technical Analysis Sentiment

Negative

Last Price29.41

Price Trends

50DMA

34.48

Negative

100DMA

36.53

Negative

200DMA

34.81

Negative

Market Momentum

MACD

-0.58

Negative

RSI

40.41

Neutral

STOCH

30.75

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For ZWS, the sentiment is Negative. The current price of 29.41 is below the 20-day moving average (MA) of 32.39, below the 50-day MA of 34.48, and below the 200-day MA of 34.81, indicating a bearish trend. The MACD of -0.58 indicates Negative momentum. The RSI at 40.41 is Neutral, neither overbought nor oversold. The STOCH value of 30.75 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for ZWS.

Zurn Water Solutions Risk Analysis

Zurn Water Solutions disclosed 31 risk factors in its most recent earnings report. Zurn Water Solutions reported the most risks in the “Finance & Corporate” category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

Zurn Water Solutions Peers Comparison

Overall Rating

UnderperformOutperform

Sector (62)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
ERII	76 Outperform	$802.35M	37.13	10.73%	―	12.93%	7.08%
ZWS	74 Outperform	$4.93B	31.83	9.96%	1.16%	2.35%	44.23%
FSS	74 Outperform	$4.53B	21.17	19.77%	0.67%	8.06%	36.93%
ATMU	71 Outperform	$2.78B	15.14	120.48%	0.45%	2.55%	8.40%
Sector *	62 Neutral	$7.50B	12.89	3.19%	3.38%	3.64%	-14.27%
CECO	61 Neutral	$696.65M	57.22	5.39%	―	2.40%	-0.38%
PCT	34 Underperform	$1.06B	―	-96.27%	―	―	-180.10%

* Industrials Sector Average

Performance Comparison

ZWS

Zurn Water Solutions

29.41

-1.94

-6.19%

CECO

Ceco Environmental

20.36

-2.69

-11.67%

ERII

Energy Recovery

14.84

0.86

6.15%

FSS

Federal Signal

76.26

-6.72

-8.10%

PCT

PureCycle Technologies

6.23

0.93

17.55%

ATMU

Atmus Filtration Technologies, Inc.

33.15

1.17

3.66%

Zurn Water Solutions Earnings Call Summary

Earnings Call Date: Feb 4, 2025 | % Change Since: -25.18% | Next Earnings Date: Apr 22, 2025

Earnings Call Sentiment Positive

The earnings call reflects a strong performance in terms of EBITDA growth, margin expansion, and effective cash flow management, while addressing challenges in certain market segments and tariff uncertainties. The company's strategic initiatives towards sustainability and balance sheet strength are positioned as positive drivers for future growth.

Highlights

Strong EBITDA Growth and Margin Expansion

The company delivered 8% adjusted EBITDA growth in Q4 2024, expanding margins to 24.6%, up 100 basis points year-over-year. For the full year, EBITDA grew by 15% to $390 million, with margins improving by 270 basis points to 24.9%.

Positive Free Cash Flow and Share Repurchases

Free cash flow for Q4 was $55 million, bringing the full year to $272 million. The company repurchased $150 million worth of shares throughout the year.

Sustainability Initiatives and Community Impact

The company advanced its sustainability strategy, including product donations in communities with high lead levels and advocacy for relevant legislation.

Strong Balance Sheet Position

The company ended 2024 with a net debt leverage below 1 at 0.8x, providing significant capital allocation flexibility.

Lowlights

Softness in Residential and Certain Commercial Segments

There was a noted softness in the residential markets and some pockets of the commercial segment within non-residential markets.

Tariff Uncertainty

The company faces uncertainties regarding tariffs, although it has reduced its exposure to China, which will be less than 10% by 2026.

Company Guidance

In the fourth quarter of fiscal year 2024, Zurn Elkay Water Solutions Corporation reported a core growth of 4%, which led to an 8% increase in adjusted EBITDA, resulting in a margin expansion to 24.6%, up 100 basis points year-over-year. For the full year, the company achieved 4% organic growth, with EBITDA increasing by 15% to $390 million, and a margin of 24.9%, an improvement of 270 basis points. Free cash flow for the quarter was $55 million, totaling $272 million for the year. The company repurchased $150 million worth of shares and allocated $20 million to its pension plan in the fourth quarter. With a net debt leverage of 0.8x, Zurn Elkay anticipates consistent market conditions for 2025, projecting an adjusted EBITDA of $405 million to $420 million and free cash flow of about $290 million.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.