What Happened?
Shares of water management solutions company Zurn Elkay (NYSE: ZWS) jumped 15.2% in the afternoon session after the company reported strong second-quarter 2025 financial results that surpassed expectations and raised its full-year guidance. The water solutions provider announced net sales of $445 million, an 8% increase year-over-year that surpassed analyst expectations. Profitability also showed significant strength, with adjusted earnings per share (EPS) growing 27% to $0.42 and adjusted EBITDA margins expanding. Buoyed by the strong performance, Zurn Elkay raised its full-year 2025 outlook for sales, adjusted EBITDA, and free cash flow. The company also demonstrated confidence by repurchasing $33 million worth of its stock during the quarter. This robust corporate performance occurred despite mixed conditions in the broader Industrials sector, and the positive investor sentiment pushed the stock to a new 52-week high.
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What Is The Market Telling Us
Zurn Elkay’s shares are not very volatile and have only had 4 moves greater than 5% over the last year. Moves this big are rare for Zurn Elkay and indicate this news significantly impacted the market’s perception of the business.
The biggest move we wrote about over the last year was 11 months ago when the stock gained 12.9% on the news that the S&P Dow Jones Indices announced that the company would be added to the S&P SmallCap 600 index before the opening of trading on Monday, September 23, 2024. Being included in the index means that Zurn Elkay Water Solutions will likely be held by many mutual funds and ETFs, which could potentially drive up demand for the stock. We note that while buying of the stock could increase, this development does not change the fundamentals of the company. Revenue growth, expense efficiency, and capital intensity of the business, for instance, are not impacted by index inclusion or exclusion, so this is more of a technical tailwind for the stock.
Zurn Elkay is up 17.4% since the beginning of the year, and at $43.31 per share, has set a new 52-week high. Investors who bought $1,000 worth of Zurn Elkay’s shares 5 years ago would now be looking at an investment worth $1,464.
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