8-K: Zurn Elkay Water Solutions Reports Strong Q2 2026 Results, Raises Outlook

Zurn Elkay Water Solutions announced robust second quarter 2026 financial results, with net sales up 10% and net income more than doubling, leading to an increased full-year outlook.

Summary

• Zurn Elkay Water Solutions reported a strong second quarter for 2026, with net sales reaching $491 million, a 10% increase compared to $445 million in the same quarter last year.
• Net income from continuing operations more than doubled to $113 million ($0.67 diluted EPS) from $50 million ($0.29 diluted EPS) in the prior year's second quarter.
• Adjusted EBITDA increased to $136 million (27.7% of net sales), up from $118 million (26.5% of net sales) in Q2 2025.
• The company repurchased $50 million of common stock in the quarter and received $48 million in cash refunds related to previously paid tariffs.
• Zurn Elkay has raised its full-year 2026 outlook, expecting mid-single digit core sales growth in the fourth quarter and full-year adjusted EBITDA between $503 million and $513 million.
• The acquisition of Intellihot was completed, expected to contribute approximately $16 million in sales for the remainder of 2026.
• Full-year free cash flow is projected to be at least $350 million, excluding tariff refunds.

Sentiment

Score: 8

Explanation: StockSavvy.ai views this as a strong positive report, with significant year-over-year improvements in key financial metrics, a raised outlook, and strategic acquisitions, indicating robust operational performance and future growth potential.

Positives

• Net sales increased by 10% year-over-year to $491 million.
• Net income from continuing operations significantly increased to $113 million, with diluted EPS rising to $0.67 from $0.29.
• Adjusted EBITDA margin expanded by 120 basis points to 27.7%.
• The company raised its full-year outlook for adjusted EBITDA and expects significant margin expansion.
• Free cash flow for the full year is projected to be at least $350 million.
• The company deployed $50 million for share repurchases and $37 million in dividends during the quarter.
• Completion of the Intellihot acquisition is expected to add strategic value and future growth.
• Net debt leverage remains low at 0.3x as of June 30, 2026.

Negatives

• Cost of sales increased to $202.7 million from $242.2 million in the prior year's quarter, though this is offset by higher revenue and productivity gains.
• The company received a significant $47.6 million IEEPA reciprocal tariff refund, which boosted reported income from operations. Excluding this, operational income still increased significantly, but the refund itself is a one-time benefit.

Risks

• The company refers to its Form 10-K for the period ended December 31, 2025, and subsequent filings for a further discussion of factors and risks associated with the business, implying ongoing risks that are not detailed in this specific release.

Future Outlook

The company expects mid-single digit core sales growth in the fourth quarter of 2026. For the full year 2026, adjusted EBITDA is projected to be between $503 million and $513 million, representing approximately 140 basis points of year-over-year margin expansion (excluding tariff refunds). Intellihot sales are expected to approximate $16 million for the remainder of 2026. Full-year free cash flow is projected to be at least $350 million, excluding tariff refunds.

Management Comments

• "We delivered a solid second quarter, first half and are raising our outlook for the full year."
• "We continue to leverage the Zurn Elkay Business System to drive above market growth in targeted areas as well as a higher baseline of incremental margins through our relentless deployment of 80/20, our supply chain initiatives and the continuous improvement our associates drive every day."
• "Our robust and increasing levels of free cash flow provide us with the flexibility to continue to be both disciplined and strategic, investing in stock repurchases, a growing dividend and acquisitions while maintaining a low leverage profile."
• "Were pleased to have completed the acquisition of Intellihot, which has been a long-term proprietary cultivation of a strategic opportunity in an adjacency we had wanted to enter."
• "We see significant long-term upside in the business as we move through a thoughtful integration plan over the coming years."
• "Beyond Intellihot, we remain on track to launch several new products into adjacent categories in the back half of 2026 and into 2027 that expand our served available market, that in time, we believe will continue to help us drive the above-market growth we have delivered for 15+ years."
• "We continue to approach our outlook through a prudent, quarter-by-quarter lens."

Industry Context

StockSavvy.ai notes that Zurn Elkay's strong performance in water management solutions, characterized by double-digit sales growth and margin expansion, aligns with broader industry trends favoring sustainable and efficient water infrastructure. The successful integration of Intellihot, a leader in high-efficiency water heating, further positions the company to capitalize on demand for advanced water technologies.

Comparison to Industry Standards

• Zurn Elkay's Adjusted EBITDA margin of 27.7% in Q2 2026 appears strong compared to many industrial manufacturing peers, though direct public comparisons are difficult without specific segment data from competitors.
• The company's reported core sales growth of 10% in Q2 2026 is robust and likely exceeds the average growth rate for many companies in the broader industrial and building products sectors.
• The low net debt leverage of 0.3x is a significant positive, indicating financial strength and flexibility compared to industry averages which can be higher for companies undergoing significant M&A or capital investment.

Stakeholder Impact

• Shareholders: Positive impact due to increased profitability, share repurchases, and dividend payments, alongside a raised future outlook.
• Employees: Continued focus on continuous improvement and strategic growth initiatives may lead to opportunities.
• Customers: Access to an expanded portfolio of water management solutions, including advanced Intellihot products.
• Suppliers: Potential for increased business volume due to sales growth and new product introductions.

Next Steps

• Continue integration of Intellihot acquisition.
• Launch new products into adjacent categories in the latter half of 2026 and into 2027.
• Continue disciplined and strategic deployment of free cash flow for stock repurchases, dividends, and acquisitions.
• Host investor call on July 29, 2026, to discuss results and outlook.

Key Dates

Recommendation

The company demonstrated strong Q2 performance with significant growth in sales and profitability, exceeding prior year results. The raised full-year outlook, robust free cash flow generation, strategic acquisition of Intellihot, and continued share repurchases and dividends all point to a company executing well and poised for continued success. The low leverage provides financial flexibility for future growth initiatives.

Keywords

Water Solutions, Water Management, Financial Results, Earnings, Acquisition, Intellihot, EBITDA, Sales Growth