8-K: Zurn Elkay Water Solutions Reports Strong Q1 2026 Results

Zurn Elkay Water Solutions announced robust first quarter 2026 financial results, with net sales up 11% and adjusted EBITDA up 18% year-over-year.

Summary

• Zurn Elkay Water Solutions reported first quarter 2026 net sales of $433 million, an 11% increase compared to $388.8 million in the same quarter last year.
• Net income from continuing operations was $59 million, or $0.35 per diluted share, up from $41 million, or $0.24 per diluted share, in the prior year's first quarter.
• Adjusted EPS increased to $0.41 from $0.31 year-over-year.
• Adjusted EBITDA reached $116 million, representing 26.8% of net sales, an increase from $98 million (25.2% of net sales) in Q1 2025.
• The company's net debt leverage was 0.5x as of March 31, 2026.
• Capacity on the revolving credit facility was increased from $200 million to $550 million.
• The company repurchased 1.0 million shares of common stock for $50 million during the quarter.

Sentiment

Score: 8

Explanation: StockSavvy.ai views this as a strong positive report, with significant year-over-year growth in key financial metrics and margin expansion, indicating effective execution of strategic initiatives.

Positives

• Strong core sales growth of 11% year-over-year.
• Significant increase in net income from continuing operations to $59 million.
• Diluted EPS from continuing operations rose to $0.35 from $0.24.
• Adjusted EPS improved to $0.41 from $0.31.
• Adjusted EBITDA grew 18% to $116 million.
• Expansion of Adjusted EBITDA margins by 160 basis points to 26.8%.
• Low net debt leverage of 0.5x.
• Increased revolving credit facility capacity to $550 million, providing enhanced financial flexibility.
• Active share repurchase program, deploying $50 million to buy back stock.

Negatives

• While not explicitly negative, the company's retained deficit was $1,122.8 million as of March 31, 2026, indicating accumulated losses over time.

Risks

• The outlook for the second quarter and full year is contingent on the current tariff structure remaining in place throughout 2026.
• Potential for future risks and uncertainties as detailed in the company's Form 10-K for the period ended December 31, 2025, and subsequent filings.

Future Outlook

The company expects second quarter 2026 core sales to grow by 8% to 9% year-over-year and adjusted EBITDA margins to be between 27.0% to 27.5%. Management sees potential for upside to the full-year 2026 outlook and plans to revisit the second half of the year outlook when Q2 results are announced. The outlook is based on the assumption that current tariff structures remain in place throughout 2026.

Management Comments

• "First quarter core sales grew 11% and adjusted EBITDA grew 18% year over year as adjusted EBITDA margins expanded 160 basis points to 26.8%."
• "We're pleased with the traction we're getting on our targeted growth initiatives as well as the progress we're making on opening new growth adjacencies that will launch later in 2026 and into 2027."
• "We continue to prioritize the relentless deployment of our strategic initiatives paired with world-class operational execution within our business by leveraging the Zurn Elkay Business System."
• "The strength and resilience of our business is something we've cultivated and added to over a long period of time, by being laser focused on building unique, sustainable competitive advantages across our business."
• "As the world increasingly faces water conservation and contamination issues, our role as a leader in water management is to meet those challenges with practical, innovative solutions that set new standards for water efficiency, safety and quality."

Industry Context

StockSavvy.ai notes that Zurn Elkay Water Solutions' strong performance in Q1 2026, particularly its double-digit sales and EBITDA growth and margin expansion, aligns with a broader industry trend of increased focus on water management solutions driven by growing concerns over water conservation, quality, and sustainability. Competitors in the water technology and infrastructure sectors are also likely experiencing demand for solutions addressing these critical global issues.

Comparison to Industry Standards

• The company's Adjusted EBITDA margin of 26.8% for Q1 2026 appears strong within the water management and solutions industry, which often sees margins vary based on product mix and service offerings. Specific comparable companies like Xylem (XYL) or Evoqua Water Technologies (now part of Xylem) would need to report their latest quarterly margins for a direct comparison.
• The 11% core sales growth is robust and likely outperforms many industrial manufacturing peers facing more moderate demand.
• The net debt leverage of 0.5x is very conservative and indicates a strong balance sheet, often a benchmark for financial health in the sector.

Stakeholder Impact

• Shareholders: Positive impact due to strong financial performance, share repurchases, and potential for future growth, which could lead to increased shareholder value.
• Employees: Continued focus on operational execution and strategic initiatives may lead to a stable or growing work environment.
• Customers: Benefit from the company's commitment to providing innovative water management solutions that address sustainability and safety concerns.
• Suppliers: Continued strong sales and production may lead to sustained demand for their products and services.

Next Steps

• Discuss Q1 2026 results, provide a business update, and respond to investor questions during the conference call on April 22, 2026.
• Launch new growth adjacencies later in 2026 and into 2027.
• Revisit the second half of 2026 outlook as Q2 results are announced.

Key Dates

Recommendation

The company demonstrated robust top-line growth, significant improvement in profitability and margins, and a strong balance sheet with conservative leverage. The strategic focus on water management solutions, coupled with successful execution and expansion into new adjacencies, positions Zurn Elkay for continued outperformance. The share repurchase program further enhances shareholder value. The outlook suggests continued positive momentum.

Keywords

Water Solutions, Zurn Elkay, Financial Results, Q1 2026, Earnings, EBITDA, Sales Growth, Water Management