Zurn Elkay Water Solutions Cor (NYSE:ZWS) executives highlighted double-digit fourth-quarter organic sales growth, margin expansion, and strong cash generation in the company’s fourth quarter 2025 earnings call, while outlining a 2026 framework that assumes largely stable end-market conditions and continued positive price-cost execution tied to tariffs.
Fourth-quarter results: 10% organic growth and margin expansion
Chairman and CEO Todd Adams said the company finished calendar 2025 with “a pretty decent fourth quarter,” reporting organic sales growth of 10% versus the prior-year period and adjusted EBITDA growth of 14% to $104 million. Adjusted EBITDA margin expanded 100 basis points to 25.6%.
On pricing and tariffs, Pauli said the company continued to deliver a positive price-cost position and saw roughly five points of price benefit in the quarter from previously announced tariff-related pricing actions. Later in the Q&A, Pauli reiterated fourth-quarter pricing was “about five points,” and described 2026 price dynamics as the inverse of 2025, with more price impact in the first half before lapping tariff-related price increases from the back half of 2025.
Full-year 2025 cash flow, capital returns, and leverage
Management emphasized cash generation and balance sheet strength. Adams said Zurn Elkay generated $83 million of free cash flow in the quarter, bringing full-year 2025 free cash flow to $317 million, up 17% from 2024. Over the course of the year, the company repurchased about 3% of shares outstanding for $160 million and paid $64 million in dividends, while leverage declined to 0.4x.
Pauli added that year-end leverage was 0.4x, the lowest since becoming a public company. He said the company deployed $25 million to share repurchases in the quarter and that the 2025 full-year repurchases averaged $36.74 per share.
Pauli also said the company continues to cultivate and evaluate its funnel of M&A opportunities, and that a combination of management capability, low leverage, and cash flow generation supports the ability to execute on “the right” transaction. Adams later told analysts the company has not seen anything transact that it believes it “missed,” and said management remains optimistic but would not predict timing.
Operational focus and organic growth priorities
Adams said 2025 provided an opportunity to “live test” the supply chain optimization plan the company has been deploying for several years, adding that “for the most part, it’s worked flawlessly.” He also described the company’s annual three-year strategic planning process and said the team sees “more new organic growth opportunities largely in adjacencies and underserved verticals than I can remember.”
In Q&A, Adams provided limited color on where the company is looking. He said the opportunities “look and feel a lot like things we do today,” are North America-based, and are “in and around water, professional-grade plumbing.” He described a strategy similar to the company’s development in fire protection, where it identified niche products, built out a broader portfolio, and grew into a substantial business. He said the company aims to leverage existing go-to-market and supply chain capabilities to become “a formidable competitor right away” in select adjacencies.
Asked about metal prices and inflation, Adams said management is watching the situation and would be “judicious and smart” about incremental price actions, while also noting supply chain changes are driving costs down month by month. Pauli said pricing actions for 2026 were “back-to-normal course.”
Sustainability and product updates
Adams previewed items expected in the company’s 2025 sustainability report, which he said would be issued later in the month. He said the company’s drinking water products provided 2.4 billion gallons of filtered water while preventing 20 billion single-use plastic bottles from entering waterways in 2025.
Adams highlighted the launch of ProFiltration, described as an evolution of the bottle filling station line with features such as top-mount filter access designed for faster filter changes, 10,000-gallon filtration capacity, filter life gauges, and UVC LED lights. He also said the company introduced a filter that expands filtration beyond PFOA and PFOS to capture the full family of PFAS and noted certifications related to reducing microplastics, lead, and total PFAS.
He also discussed expanding filtration into residential applications with Liv EZ and said Zurn Elkay partnered with TerraCycle to launch a recycling program for used water filters using “zero-waste boxes.” Adams said activated carbon filters “retain more than 99.5% of PFAS,” helping ensure contaminants remain contained during disposal.
Beyond drinking water, Adams said World Dryer hand dryers eliminated the need for 3.5 billion paper towels in 2025, and he highlighted the launch of the Sanitize & Dry sanitizing dryer using cold plasma technology, which he said neutralizes 99.99% of common bacteria and viruses, including SARS, COVID, E. coli, norovirus, influenza A, and the common cold, without chemicals.
2026 outlook: mid-single-digit core growth and $335 million free cash flow target
Pauli laid out the company’s 2026 guidance framework, calling it consistent with prior years by providing a range it has confidence in delivering early in the year. For full-year 2026, management expects:
- Core sales growth of “plus mid-single digits”
- Incremental adjusted EBITDA margins of approximately 35% on increased sales
- Approximately $335 million of free cash flow
The company’s end-market assumptions for 2026 were described as similar to 2025: institutional and waterworks end markets growing at low single digits, commercial end markets “flattish,” and residential remaining tough. Overall, management assumes the market is “generally flat to slightly positive.”
Tariffs remain a key variable. Pauli said guidance assumes tariffed countries and rates remain consistent throughout 2026 at current levels. He said the company navigated 2025 tariffs well and continues executing a strategy to exit direct material purchases from China, targeting “only a few points” of cost of goods sold spend from China by the end of 2026, with some products ahead of schedule. He also said the company remains confident in delivering a positive dollar price-cost impact from tariffs in 2026.
For the first quarter of 2026, management projected core sales growth of 7% to 8% year-over-year and incremental adjusted EBITDA margins of approximately 35%, implying an EBITDA margin of approximately 25.5% to 26% and roughly 60 basis points of margin expansion at the midpoint.
In Q&A, Adams said the company is “off to a really good start” in January, while emphasizing there are 11 months remaining in the year. He also said that, over time, incremental margins could move higher if execution continues and mix shifts toward faster-growing categories that are above the company average, though management characterized 35% incremental margins as a baseline it is “very comfortable with.”
Elsewhere, management addressed questions on regulatory attention to drinking water, suggesting EPA actions such as the Lead and Copper Rule help sustain awareness rather than materially accelerate demand. On filtration, Pauli said ProFiltration has seen good early adoption and that its features and filter system support a “very high” attachment rate. Adams said the company is measuring attachment rate but does not view it as a metric to update every 30 to 90 days, instead pointing to multi-year installed base growth as the key driver of filtration pull-through.
Finally, Adams said data centers are a growing category for Zurn Elkay and that the company participates with a “great suite of products” connected to water, plumbing, drainage, and fire protection, though it does not supply heating or cooling equipment. He said the category was helping results exiting 2025 and heading into 2026, even if it may not become a large portion of the overall business mix.
About Zurn Elkay Water Solutions Cor (NYSE:ZWS)
Zurn Elkay Water Solutions Corp, trading on the NYSE under the ticker ZWS, is a global provider of water delivery and plumbing products. The company was established in October 2022 through a spin-off from Rexnord Corp, creating a standalone business focused on designing, manufacturing and marketing water system components for residential, commercial and industrial customers.
Through its Zurn segment, the company offers solutions for water delivery, drainage and waste evacuation. Product lines include valves, hydrants, backflow prevention devices, piping systems, fittings and commercial waste stations.
