Zurn Elkay Water Solutions: A Strong Q3 Performance and Positive Outlook

Zurn Elkay Water Solutions Corporation (NYSE: ZWS) recently reported its third quarter 2024 financial results, showcasing a solid performance and positive outlook for the remainder of the year. The company's strong adjusted EBITDA margins and free cash flow generation, coupled with its strategic growth initiatives, have positioned it well for continued success.



Key highlights from the third quarter include:

* Net sales of $410 million, up 3% year over year, driven by 4% pro forma core sales growth and offset by a 100 basis point impact from the planned exit of certain residential sink products.
* Net income from continuing operations of $44 million, with diluted EPS from continuing operations of $0.25.
* Adjusted EPS of $0.34, up from $0.29 in the year-ago quarter.
* Adjusted EBITDA of $105 million, or 25.6% of net sales, up from $96 million, or 24.1% of net sales, in last year's third quarter.
* Net debt leverage of 0.8x as of September 30, 2024.

Todd A. Adams, Chairman and CEO of Zurn Elkay Water Solutions, commented on the strong performance: "We delivered a solid quarter as both sales and margins exceeded the guidance we provided 90 days ago. Despite pockets of challenging end markets, our third quarter pro forma core sales growth was 4% and adjusted EBITDA margins grew by 150 basis points year over year to 25.6%. Free cash flow continues to be exceptional as we generated $87 million of free cash flow in the third quarter bringing our year to date total to $217 million."



For the fourth quarter, the company expects core net sales to be up low single digits on a pro forma core basis, with adjusted EBITDA margin between 24.5% and 25.0%. The company also raised its full year adjusted EBITDA margin expectation to approximately 150 to 200 basis points of year over year adjusted EBITDA margin expansion.

Zurn Elkay Water Solutions' strong performance in the third quarter, driven by its strategic growth initiatives and operational efficiency, has positioned the company well for continued success in the fourth quarter and beyond. The company's focus on sustainability, innovation, and customer satisfaction, coupled with its robust financial position, makes it an attractive investment opportunity in the water management sector.