Water management solutions company Zurn Elkay (NYSE: ZWS) announced better-than-expected revenue in Q2 CY2026, with sales up 10.5% year on year to $491 million. Its non-GAAP profit of $0.50 per share was 5.8% above analysts’ consensus estimates.

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Todd A. Adams, Chairman and Chief Executive Officer, commented, “We delivered a solid second quarter, first half and are raising our outlook for the full year. Core sales(1) grew 10% and adjusted EBITDA margins(1) of 27.7% expanded by 120 basis points over the prior year second quarter. 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(1) 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. In the quarter we repurchased $50 million dollars of our own shares, bringing the total to $100 million over the first half of 2026 while also paying $37 million in dividends.”

Company Overview

Claiming to have saved more than 30 billion gallons of water, Zurn Elkay (NYSE: ZWS) provides water management solutions to various industries.

Revenue Growth

A company’s long-term sales performance is one signal of its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Over the last five years, Zurn Elkay grew its sales at a solid 9.6% compounded annual growth rate. Its growth beat the average industrials company and shows its offerings resonate with customers, a helpful starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Zurn Elkay’s annualized revenue growth of 7.7% over the last two years is below its five-year trend, but we still think the results were respectable.

We can dig further into the company’s sales dynamics by analyzing its organic revenue, which strips out one-time events like acquisitions and currency fluctuations that don’t accurately reflect its fundamentals. Over the last two years, Zurn Elkay’s organic revenue averaged 6.8% year-on-year growth. Because this number aligns with its two-year revenue growth, we can see the company’s core operations (not acquisitions and divestitures) drove most of its results.

This quarter, Zurn Elkay reported year-on-year revenue growth of 10.5%, and its $491 million of revenue exceeded Wall Street’s estimates by 1.6%.

Looking ahead, sell-side analysts expect revenue to grow 4.7% over the next 12 months, a slight deceleration versus the last two years. This projection is underwhelming and implies its products and services will see some demand headwinds. At least the company is tracking well in other measures of financial health.

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Operating Margin

Zurn Elkay has been an efficient company over the last five years. It was one of the more profitable businesses in the industrials sector, boasting an average operating margin of 14.8%. This result isn’t surprising as its high gross margin gives it a favorable starting point.

Looking at the trend in its profitability, Zurn Elkay’s operating margin rose by 6.3 percentage points over the last five years, as its sales growth gave it immense operating leverage.

This quarter, Zurn Elkay generated an operating margin profit margin of 31%, up 13.6 percentage points year on year. The increase was solid, and because its operating margin rose more than its gross margin, we can infer it was more efficient with expenses such as marketing, R&D, and administrative overhead.

Earnings Per Share

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Sadly for Zurn Elkay, its EPS declined by 2.3% annually over the last five years while its revenue grew by 9.6%. However, its operating margin actually improved during this time, telling us that non-fundamental factors such as interest expenses and taxes affected its ultimate earnings.

We can take a deeper look into Zurn Elkay’s earnings to better understand the drivers of its performance. A five-year view shows Zurn Elkay has diluted its shareholders, growing its share count by 35.8%. This dilution overshadowed its increased operational efficiency and has led to lower per share earnings. Taxes and interest expenses can also affect EPS but don’t tell us as much about a company’s fundamentals.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For Zurn Elkay, its two-year annual EPS growth of 20.5% was higher than its five-year trend. This acceleration made it one of the faster-growing industrials companies in recent history.

In Q2, Zurn Elkay reported adjusted EPS of $0.50, up from $0.42 in the same quarter last year. This print beat analysts’ estimates by 5.8%. Over the next 12 months, Wall Street expects Zurn Elkay’s full-year EPS to grow 9.2% from $1.70 to $1.86.

Key Takeaways from Zurn Elkay’s Q2 Results

It was encouraging to see Zurn Elkay beat analysts’ revenue expectations this quarter. We were also happy its EBITDA outperformed Wall Street’s estimates. Overall, we think this was a solid quarter with some key areas of upside. The stock traded up 1.5% to $49.99 immediately following the results.

Zurn Elkay put up rock-solid earnings, but one quarter doesn’t necessarily make the stock a buy. Let’s see if this is a good investment. If you’re making that decision, you should consider the bigger picture of valuation, business qualities, as well as the latest earnings. We cover that in our actionable full research report which you can read here (it’s free).