Q2 2024 Earnings Summary
Reported on Jan 8, 2025 (After Market Close)
Pre-Earnings Price$32.46Last close (Jul 31, 2024)
Post-Earnings Price$32.41Open (Aug 1, 2024)
Price Change
$-0.05(-0.15%)
- Strong margin performance driven by structural improvements and continuous improvement activities, with a 42% year-over-year increase in continuous improvement actions, leading to significant margin expansion that is expected to continue into the future.
- Successful integration of the Elkay merger, achieving more than $50 million in synergies, leading to higher incremental margins (closer to 35%), and anticipating further margin improvements from supply chain actions expected to yield an additional $5 million to $10 million in 2025.
- Significant growth initiatives in new products, particularly in the drinking water business supported by favorable legislation (e.g., 'Filter First' laws in Michigan, Wisconsin, Minnesota, and Pennsylvania), expected to be a major growth driver over the next couple of years.
- Weakness in commercial markets may worsen sequentially, leading to potential headwinds for overall growth. Management acknowledged that the commercial segment "may be worse sequentially" and they've been absorbing this headwind for a while.
- Potential tariff increases could negatively impact the supply chain, especially if political changes lead to higher tariffs on imports from China or Mexico. Despite efforts to deemphasize China in their supply chain, management admitted that "if it's different than that, we'll have to manage through it."
- Seasonality and lower sales volumes in Q4 may lead to margin contraction, with management indicating that margins typically step down in the fourth quarter due to seasonality and lower sales volumes. This suggests that the strong margins seen in H1 may not be sustained.