Stifel has increased its price target for Zurn Elkay Water (ZWS, Financial) shares, moving it up from $34 to $39 while maintaining a Buy rating. This adjustment is driven by the company's robust performance in the first quarter and a projected lower immediate, direct impact from tariffs, estimated at around $50 million in 2025.
The analyst highlights that Zurn Elkay Water is poised to benefit from its pre-tariff strategies aimed at diminishing its reliance on the Chinese supply chain. This approach is expected to help the company minimize cost impacts more effectively than its competitors, potentially leading to financial gains in the near future.
Wall Street Analysts Forecast
Based on the one-year price targets offered by 7 analysts, the average target price for Zurn Elkay Water Solutions Corp (ZWS, Financial) is $35.43 with a high estimate of $40.00 and a low estimate of $29.00. The average target implies an upside of 8.51% from the current price of $32.65. More detailed estimate data can be found on the Zurn Elkay Water Solutions Corp (ZWS) Forecast page.
Based on the consensus recommendation from 8 brokerage firms, Zurn Elkay Water Solutions Corp's (ZWS, Financial) average brokerage recommendation is currently 2.4, indicating "Outperform" status. The rating scale ranges from 1 to 5, where 1 signifies Strong Buy, and 5 denotes Sell.
Based on GuruFocus estimates, the estimated GF Value for Zurn Elkay Water Solutions Corp (ZWS, Financial) in one year is $33.34, suggesting a upside of 2.11% from the current price of $32.65. GF Value is GuruFocus' estimate of the fair value that the stock should be traded at. It is calculated based on the historical multiples the stock has traded at previously, as well as past business growth and the future estimates of the business' performance. More detailed data can be found on the Zurn Elkay Water Solutions Corp (ZWS) Summary page.
ZWS Key Business Developments
Release Date: April 23, 2025
- Revenue: First quarter sales totaled $389 million, representing 5% core growth.
- EBITDA Margin: Adjusted EBITDA margin expanded 110 basis points year over year to 25.2%.
- Adjusted EBITDA: First quarter adjusted EBITDA was $98 million.
- Cash Flow: Cash flow ahead of expectations.
- Net Debt Leverage: Ended the quarter with leverage below 1 at 0.9 times.
- Share Repurchases: Deployed $77 million to repurchase shares in the quarter.
- Tariff Impact: Expected tariff cost impact for 2025 between $45 million and $55 million.
- Supply Chain Strategy: Direct material spend from China to be under $30 million by the end of 2026.
- Filtered Water Delivery: 600 million gallons delivered in Q1, up 33% year over year.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Zurn Elkay Water Solutions Corp (ZWS, Financial) reported a solid Q1 with 5% organic growth and a 110 basis point improvement in EBITDA margins year over year.
- The company achieved cash flow ahead of expectations, indicating strong financial management.
- ZWS has a strategic plan to reduce its supply chain exposure to China, aiming for only 2% to 3% of COGS from China by the end of 2026.
- The company has been recognized for its sustainability efforts, including delivering 600 million gallons of filtered water in Q1, a 33% increase over the prior year.
- ZWS ended the quarter with a strong balance sheet, maintaining a net debt leverage below 1 at 0.9 times, even after deploying $77 million for share repurchases.
Negative Points
- The company faces potential cost increases due to tariffs, with an expected impact of $45 million to $55 million in 2025.
- There is uncertainty regarding the impact of tariffs on future pricing and demand, which could affect financial performance.
- ZWS's residential and certain commercial segments within non-residential markets showed softness, partially offsetting growth.
- The company is operating in an environment with potential new tariffs or added costs for the foreseeable future, which could impact profitability.
- There is a risk of demand destruction due to price increases, although the extent is currently unknown.
