Zurn Elkay's Q4 2024: Unpacking Contradictions in Market Growth, Tariff Strategies, and Supply Chain Dynamics

These are the key contradictions discussed in Zurn Elkay Water Solutions' latest 2024Q4 earnings call, specifically including: Institutional and Commercial Growth Expectations, Tariff Impacts, and Supply Chain and Tariff Management Strategy:



Strong Financial Performance and EBITDA Growth:
- Zurn Elkay Water Solutions reported an adjusted EBITDA of $91 million for Q4 2024, representing a 100 basis point year-over-year margin expansion to 24.6%.
- The growth was leveraged from fourth quarter core growth of 4% into 8% adjusted EBITDA growth, driven by productivity initiatives and leveraging the Zurn Elkay business system.

Capital Allocation and Share Repurchases:
- The company deployed $57 million to dividends and $150 million to share repurchases in 2024, totaling $200 million in capital allocation.
- This includs the repurchase of 533,000 shares in Q4 at an average price of $32, reflecting a strategic allocation to enhance shareholder value.

Operational Efficiency and Continuous Improvement:
- Zurn Elkay achieved $5.9 million in savings through 3,749 continuous improvement actions in 2024, averaging $1,586 per submission.
- The company attributed this to its #CI program, which encourages associates to share ideas, enhance problem-solving, and improve overall operational efficiency.

Sustainability Initiatives and Environmental Impact:
- Zurn Elkay strengthens communities through product donations and volunteerism, focusing on areas with high levels of lead in drinking water, including Syracuse, New York.
- The company advocates for Filter First legislation in several states, demonstrating a commitment to environmental sustainability and product innovation to reduce water usage and contaminants.

Outlook and Market Dynamics:
- For 2025, the company expects core sales growth similar to 2024 and adjusted EBITDA of $405 million to $420 million.
- The outlook assumes low single-digit declines in commercial markets, offset by growth in institutional and Waterworks markets, with approximately 1 point of price realization during the year.