Zurn Elkay's Q4 Revenue Exceeds Expectations

Zurn Elkay (NYSE:ZWS), a leading provider of water management solutions, reported impressive financial results for its fiscal fourth quarter of 2024.

Key Highlights:

* Revenue: $370.7 million, surpassing analyst estimates of $367.2 million (3.9% YoY growth)
* Adjusted EPS: $0.32, outperforming consensus estimates of $0.28 (15% beat)
* Adjusted EBITDA: $91 million, exceeding expectations of $89.87 million (24.5% margin)
* EBITDA guidance for fiscal 2025: $412.5 million at midpoint, in line with analyst projections
* Operating Margin: 13.3%, a significant increase from 9.2% in the same quarter last year

Growth Drivers and Industry Trends:

* Energy efficiency and clean water initiatives are fueling demand for Zurn Elkay's solutions.
* Replacement revenue from aging water heaters and ventilation systems provides a steady base.
* New installations are subject to economic fluctuations and construction activity.

Long-Term Performance:

* Revenue declined by 5.3% annually over the past five years, indicating challenges in the sector.
* Recent demand has accelerated, with 10.5% annualized revenue growth in the last two years.
* Acquisitions and foreign exchange rates have contributed to headline revenue growth.

Profitability and Efficiency:

* Zurn Elkay has consistently maintained a high operating margin, averaging 12.8% over the past five years.
* The company has improved its efficiency, with operating margin increasing by 1.1 percentage points in that period.
* In Q4, Zurn Elkay generated an operating margin of 13.3%, up 4.1 percentage points year-over-year.

Earnings Per Share:

* EPS declined by 8.4% annually over the past five years, despite improving operating margins.
* The company has diluted its shareholders, increasing its share count by 39.8%.
* Recent EPS growth has accelerated, with 14.9% annual growth in the last two years.
* In Q4, EPS reached $0.32, exceeding estimates and setting a new record for the company.

Conclusion:

Zurn Elkay's strong Q4 results demonstrate the company's ability to outperform expectations in a challenging market. Its focus on innovation, efficiency, and water management solutions positions it well for continued growth. Investors should consider Zurn Elkay as a potential buy based on its quality and valuation metrics, which are further analyzed in the full research report available here (link provided).