Zurn Elkay Water Solutions (ZWS)·Q4 2025 Earnings Summary
Zurn Elkay Beats on Record Year as FCF Hits $317M, Guides to Strong 2026
February 4, 2026 · by Fintool AI Agent
Zurn Elkay Water Solutions (NYSE: ZWS) delivered its eighth consecutive earnings beat, posting Q4 2025 revenue of $407.2M (+10% core sales growth) and adjusted EPS of $0.36, both exceeding Street expectations . The water management company closed out a record 2025 with $1.70B in annual revenue, $1.52 in adjusted EPS (+19% YoY), and record free cash flow of $317M .
Did Zurn Elkay Beat Earnings?
Yes — both revenue and EPS exceeded consensus estimates:
This extends Zurn Elkay's beat streak to 8 consecutive quarters . Core sales grew 10% year-over-year with growth across nearly all product categories .
Ask Fintool AI AgentWhat Did Management Guide?
Management provided constructive guidance for both Q1 and full-year 2026, emphasizing confidence across various end-market scenarios :
Q1 2026 Outlook:
- Core sales growth: 7-8%
- Incremental margins: ~35%
Full Year 2026 Outlook:
- Core sales growth: Mid-single digits
- Incremental adjusted EBITDA margins: ~35%
- Free cash flow: ~$335M
End-Market Expectations for 2026:
Below-the-Line Assumptions (FY 2026):
- Interest expense: ~$27M
- Stock compensation: ~$42M
- D&A: ~$87M
- Tax rate: 25-27%
- Diluted shares: ~171M (assumes no additional buybacks)
CEO Todd Adams noted the company is "confident in our ability to drive superior results in a variety of end market and macro environment scenarios" .
How Did the Stock React?
ZWS traded relatively flat on the day, closing at $47.06 (+0.6%)* — suggesting the beat was largely priced in after a strong run. The stock is up ~70% from its 52-week low of $27.74*.
*Values retrieved from S&P Global
What Changed From Last Quarter?
Key Deltas from Q3 2025:
The sequential revenue decline is seasonal (Q4 is typically the smallest quarter), but YoY trends remain strong. Net debt leverage improved to 0.4x as the company continues to generate robust free cash flow .
Full Year 2025 — A Record Year
Zurn Elkay delivered record results across all key metrics in calendar year 2025 :
Ask Fintool AI AgentCapital Allocation Highlights
The company continues to deploy capital aggressively toward shareholder returns while maintaining a conservative balance sheet :
- Share Repurchases: $160M in 2025 ($25M in Q4 alone, repurchasing 0.5M shares)
- Dividends: $64M paid in 2025, with a 22% YoY dividend increase
- Balance Sheet: Net debt leverage of just 0.4x provides significant M&A capacity
CEO Adams highlighted the company's "balance sheet, outlook and management capacity that gives us the ability to deploy capital to continue to deliver shareholder value" .
Multi-Year Margin Expansion Story
The Q4 results cap off a remarkable multi-year margin transformation driven by the Zurn Elkay Business System and continuous improvement culture:
Net debt leverage has improved dramatically from 1.4x in December 2022 to just 0.4x in December 2025 .
Key Takeaways for Investors
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Execution Excellence: 8 consecutive beats demonstrate consistent operational execution through the Zurn Elkay Business System
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Margin Expansion: Full-year adjusted EBITDA margins expanded 550bps over 4 years from 20.6% (2022) to 26.1% (2025)
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FCF Machine: Record free cash flow of $317M in 2025 (up from $140M in 2022), with guidance for $335M in 2026
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Fortress Balance Sheet: 0.4x net debt leverage (down from 1.4x in 2022) leaves ample room for opportunistic M&A or continued buybacks
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Sustainability Focus: 2025 sustainability report to be issued mid-February featuring new goals for water reduction, single-use plastic avoidance, and R&D investment
Q&A Highlights From the Earnings Call
On the Strong Start to 2026: CEO Todd Adams noted the company is "off to a really good start in January, but still 11 months to go in 2026" . Q1 guidance of 7-8% core sales growth reflects confidence in near-term execution, though management takes a prudent approach to full-year guidance .
On Pricing Dynamics: Q4 2025 included roughly 5 points of tariff-related pricing . CFO Dave Pauli explained 2026 pricing will be the "exact opposite" of 2025 — 4-5 points in H1, then lapping prior increases in H2 .
On M&A and Adjacencies: Management expanded their view on potential new markets through the strategic planning process. Adams described opportunities that "look and feel a lot like things we do today — North American-based, in and around water, professional-grade plumbing" . He drew parallels to the fire protection playbook from 5-7 years ago where they "identified some niche products, then built out a portfolio around that" .
On Supply Chain and Tariffs: The company is "on track and with some products ahead of schedule" to reduce China COGS exposure to just a few points by end of 2026 . Management emphasized they "navigated through the 2025 tariffs very well" and expect positive dollar price-cost from tariffs in 2026 .
On Drinking Water and ProFiltration: The new ProFiltration bottle filling station features 30-second filter changes, 10,000-gallon filter capacity, and expanded PFAS/microplastics filtration . CFO Pauli noted the product has a "very high" attachment rate due to proprietary filter heads . The EPA's Lead and Copper Rule is expected to "help sustain" rather than accelerate the already-healthy drinking water trajectory .
On Data Centers: Adams addressed investor questions directly: "We absolutely are [in data centers]. It's absolutely growing quickly for us" . While data centers may never be a "wedge in our pie," the company has full content in water, plumbing, drainage, and fire protection for these facilities .
On Incremental Margins: Asked about future margin expansion, Adams noted "our fastest-growing categories and products are above the fleet average" creating natural mix tailwinds. He confirmed 35% is a "baseline we're very comfortable with" and expects the number "can move higher" over 2-3 years .
Ask Fintool AI AgentSustainability Highlights
The 2025 sustainability report (to be issued later in February) will showcase significant progress :
- Drinking Water Impact: 2.4 billion gallons of filtered water provided, preventing 20 billion single-use plastic bottles from entering waterways
- Hand Dryer Sustainability: World Dryer hand dryers eliminated 3.5 billion paper towels in 2025
- New Product Launch: Sanitize & Dry hand dryer with cold plasma technology neutralizes 99.99% of bacteria/viruses without chemicals
- Filter Recycling: Partnership with TerraCycle launched for recycling used water filters
- Philanthropy: $1.9 million in giving in 2025, including Fountains of Youth program for under-resourced schools
Continuous Improvement Culture (ZEBS)
The Zurn Elkay Business System drives operational excellence through grassroots continuous improvement :
Adams emphasized the power of compounding: "Making things 1% better every day... compounds into improved quality, better customer satisfaction, more engaged associates, lower cost" .
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