Zurn Water Solutions Corporation ((ZWS)) has held its Q3 earnings call. Read on for the main highlights of the call.
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The latest earnings call from Zurn Water Solutions Corporation painted a picture of robust performance and strategic progress. Despite facing challenges such as residential market softness and increased tariff costs, the company demonstrated significant organic growth, impressive shareholder returns, and strategic achievements like the termination of its U.S. pension plan. The overall sentiment was positive, with a focus on continued growth potential.
Strong Organic Growth
Zurn Water Solutions reported an impressive 11% year-over-year organic sales growth. The company’s EBITDA increased by 16% to $122 million, with a margin expansion of 120 basis points to 26.8%. This strong performance underscores the company’s ability to drive growth organically, even amidst market challenges.
Shareholder Returns
The company has been proactive in returning value to its shareholders, repurchasing about 600,000 shares and raising the dividend by 22%. Year-to-date, share repurchases have reached $135 million, reflecting Zurn’s commitment to enhancing shareholder value.
U.S. Pension Plan Termination
A significant strategic achievement for Zurn was the completion of its U.S. pension plan termination, which eliminated a $200 million liability. This move not only strengthens the company’s balance sheet but also positions it for future financial flexibility.
Sustainability Achievements
Zurn continues to make strides in sustainability, delivering 1.8 billion gallons of safer, cleaner filtered drinking water and eliminating the need for 14.6 billion single-use plastic bottles. These efforts highlight the company’s commitment to environmental responsibility.
Low Leverage
The quarter ended with a leverage ratio of 0.6x, marking the lowest level since becoming a public company. This low leverage provides Zurn with a strong foundation for future investments and growth opportunities.
Positive Outlook for Future Growth
Zurn has raised its full-year estimates for growth, profitability, and cash flow, projecting high single-digit core sales growth and adjusted EBITDA between $99 million and $102 million for the fourth quarter. This optimistic outlook reflects the company’s confidence in its strategic initiatives and market position.
Residential Market Softness
Despite the positive results, Zurn continues to experience softness in the residential market. This challenge is being addressed through strategic initiatives aimed at mitigating its impact on overall performance.
Tariff Impact
Tariff costs are expected to be approximately $50 million for 2025, higher than initially projected. The company is actively managing these costs to minimize their impact on profitability.
Guidance
Looking ahead, Zurn Elkay Water Solutions has raised its full-year outlook, expecting core sales growth of about 8%, adjusted EBITDA between $437 million and $440 million, and free cash flow exceeding $300 million. The company remains focused on strategic growth initiatives while managing external challenges such as tariff impacts.
In summary, Zurn Water Solutions Corporation’s earnings call reflects a strong performance with strategic achievements and a positive outlook. The company’s focus on organic growth, shareholder returns, and sustainability, coupled with its low leverage, positions it well for continued success despite market challenges.