Zurn Elkay’s third quarter results were met with a significant negative market reaction, despite the company delivering organic revenue growth and notable margin expansion. Management attributed the performance to solid contributions from both its water safety and drinking water product categories, with CEO Todd Adams highlighting ongoing operational improvements and the benefit from the company’s recent Intellihot acquisition. Adams also pointed to the company’s ability to maintain positive core growth even in a mixed market environment, emphasizing, “We have demonstrated the ability to deliver core growth through a number of different market dynamics.”
Is now the time to buy ZWS? Find out in our full research report (it’s free for active Edge members).
Zurn Elkay (ZWS) Q3 2026 highlights:
- Revenue $495.1 million vs S&P analysts’ estimates of $492.8 million (8.7% year-on-year growth, in line)
- Adjusted EPS $0.52 vs S&P analysts’ estimates of $0.50 (4.2% beat)
- Adjusted EBITDA $140.1 million vs analyst estimates of $138.2 million (28.3% margin, 1.4% beat)
- Revenue guidance $433.5 million at the midpoint for Q4 2026, below analyst estimates of $438.1 million
- EBITDA guidance $121.5 million at the midpoint for Q4 2026, above analyst estimates of $118.9 million
- Operating margin 21.9%, up from 17% in the same quarter last year
- Organic revenue rose 7% year on year
- Market capitalization $7.18 billion
While we enjoy listening to the management’s commentary, our favorite part of earnings calls is the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our top 5 analyst questions from Zurn Elkay’s Q3 earnings call
- Bryan Blair (Oppenheimer) asked whether core growth deceleration was due to pricing or volume. CEO Todd Adams clarified that reduced price realization was the main factor, with volume holding steady.
- Jae Hyun Ko (Jefferies) questioned if improving education and healthcare construction could boost growth rates. Adams said potential market tailwinds, combined with adjacency expansion, could lift organic growth if trends materialize.
- Adam Farley (Stifel) pressed on future pricing actions amid rising inflation. Adams responded that price increases are expected to be modest and in line with historical patterns, unless input costs change materially.
- Jeffrey Hammond (KeyBanc Capital Markets) inquired about the hot water product development pipeline. Adams explained that a mix of internally developed and acquired products is in progress, aiming to sustain new market entry.
- Jeffrey Reive (RBC Capital Markets) asked about construction backlog timing and potential project delays. COO David Pauli indicated that while some delays are occurring, they are consistent with prior expectations and are not materially impacting shipments.
Catalysts in upcoming quarters
In the coming quarters, the StockStory team will be watching (1) adoption and scaling of new digital water management products like the Wilkins Runpoint valve, (2) the impact of SKU simplification and productivity initiatives on incremental margins, and (3) signs of stabilization in nonresidential construction activity. Continued progress in adjacent markets and successful integration of recent acquisitions will also be important indicators of execution.
Zurn Elkay currently trades at $43.47, down from $49.15 just before the earnings. In the wake of this quarter, is it a buy or sell? Find out in our full research report (it’s free).
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