Zurn Elkay Tops Outlook, Enters Water Heating
The company expects acquisition target Intellihot to generate about $37 million in 2026 sales.
Zurn Elkay Water Solutions (ZWS), the water-management company, said second-quarter results exceeded the outlook range it had provided earlier in the quarter, extending the stronger operating trajectory established at the start of the year.
The update marked an improvement from May, when Zurn Elkay said results were tracking in line with its outlook. Its April forecast had called for core-sales growth of 8% to 9% and an adjusted EBITDA margin of 27.0% to 27.5%.
First-quarter net sales rose 11% from a year earlier to $433 million, following 10% core-sales growth in the fourth quarter. Sales also increased from $407 million in the preceding quarter.
Profitability strengthened alongside that growth. Adjusted EBITDA increased to $116 million in the first quarter from $104 million in the fourth, while the margin widened to 26.8% from 25.6%. Adjusted earnings rose 32% from a year earlier to $0.41 a share, accelerating from the fourth quarter’s 13% increase.
Zurn Elkay also agreed to acquire Intellihot, giving the company an entry into high-efficiency water heating for commercial and institutional customers. The transaction is expected to close early in the third quarter.
The company stepped up first-quarter share repurchases to $50 million from $25 million in the fourth quarter. Net debt leverage edged up to 0.5 times from 0.4 times at year-end, remaining below the 0.6 times recorded at the end of the third quarter.
The planned Intellihot purchase adds a new product category as Zurn Elkay enters the third quarter with second-quarter performance above its earlier range.