Earnings Recap — Q2 FY2026
CY Q3 2026 · Reported July 28, 2026 · Beat 7 of last 7 quarters
Zurn Elkay Water Solutions Corporation reported Q2 FY2026 revenue of $491M, a beat of 1.6% against consensus, and EPS of $0.50, a beat of 5.6%.
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Zurn Elkay's record margins and raised guidance reflect the strength of the water infrastructure segment within the broader AI infrastructure buildout, as data centers and institutional facilities require advanced water management solutions. The Intellihot acquisition expands the company's exposure to high-efficiency water heating, a critical component for cooling and mechanical systems in modern facilities. Continued share gains in drinking water and water safety products signal sustained demand for reliable, compliant water infrastructure.
Zurn Elkay delivered 10% organic sales growth in Q2 FY2026, with adjusted EBITDA up 15% to $136 million and margin expanding 120 bps to a record 27.7%. Growth was led by water safety and control and drinking water, both above the fleet average. The company received $48 million in tariff refunds (excluded from adjusted results) and closed the Intellihot acquisition for $109 million. Management highlighted continued strength in higher-margin platforms and the compounding benefits of the Zurn Elkay Business System, with incremental margins running at 40%.
Management raised full-year 2026 guidance for sales, EBITDA, and free cash flow, reflecting strong first-half performance. Full-year adjusted EBITDA is now expected between $503 million and $513 million, with free cash flow of at least $350 million (excluding tariff refunds). The company expects Q3 core sales growth of 6%–7% and adjusted EBITDA margin around 28%, with Q4 core growth in the mid-single digits as tariff-related price increases roll off. The Intellihot acquisition is expected to contribute ~$18 million in net sales in the second half, with a path to $100 million in sales and 30% EBITDA margins within 5–6 years. Management emphasized continued margin expansion (140 bps at the midpoint) driven by mix, productivity, and supply chain advantages, while maintaining a disciplined approach to capital deployment and portfolio pruning.
“The point is that to get on that kind of trajectory, we're going to invest in it, add products around it, work the efficiency and regulatory angles and grow the installed base.”
on Intellihot growth strategy
“We see a very clear path for a double-digit return on invested capital in 3 years. In our view, we believe that Intellihot can be a $100 million business with a 30% EBITDA margin in the next 5 years.”
on Intellihot acquisition outlook
“Our supply chain has been a clear competitive advantage that has allowed us to improve profitability, while successfully navigating the tariff environment.”
on Supply chain advantage
Rank order the growth of your higher-margin platforms (water safety and control, drinking water, flow systems) and how much below is hygienic and environmental?
Todd Adams noted that water safety and control and drinking water are growing slightly above flow systems, with hygienic and environmental still positive but the smallest category.
Is it fair that price realization is trending towards the high end of the 3%–4% range? Have you had to put through more price midyear?
Dan Klun confirmed price is in the 3%–4% range, with no additional price increases needed during 2026; the new tariff regime was anticipated and no hiccups expected.
What will be the primary focus areas for the 2027 strategic plan?
Todd Adams indicated continued progress on adjacencies in $100M–$200M markets, aiming for $20M–$30M revenue over 3 years per initiative, with announcements expected in the back half of 2026 and into 2027.