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Unpacking Q1 Earnings: Zurn Elkay (NYSE:ZWS) In The Context Of Other HVAC and Water Systems Stocks

By: StockStory

June 02, 2025 at 23:31 PM EDT

ZWS Cover Image

Earnings results often indicate what direction a company will take in the months ahead. With Q1 behind us, let’s have a look at Zurn Elkay (NYSE: ZWS) and its peers.

Many HVAC and water systems companies sell essential, non-discretionary infrastructure for buildings. Since the useful lives of these water heaters and vents are fairly standard, these companies have a portion of predictable replacement revenue. In the last decade, trends in energy efficiency and clean water are driving innovation that is leading to incremental demand. On the other hand, new installations for these companies are at the whim of residential and commercial construction volumes, which tend to be cyclical and can be impacted heavily by economic factors such as interest rates.

The 9 hvac and water systems stocks we track reported a satisfactory Q1. As a group, revenues beat analysts’ consensus estimates by 2.1% while next quarter’s revenue guidance was 0.7% below.

In light of this news, share prices of the companies have held steady as they are up 2.8% on average since the latest earnings results.

Zurn Elkay (NYSE: ZWS)

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

Zurn Elkay reported revenues of $388.8 million, up 4% year on year. This print exceeded analysts’ expectations by 1.4%. Despite the top-line beat, it was still a mixed quarter for the company with a solid beat of analysts’ adjusted operating income estimates but a significant miss of analysts’ organic revenue estimates.

Todd A. Adams, Chairman and Chief Executive Officer, commented, “We had a solid start to 2025, delivering first quarter core sales(1) growth of 5% along with 25.2% adjusted EBITDA margins(1), an increase of 110 basis points year over year. We also returned significant capital to shareholders in the form of $77 million in share repurchases and $15 million in dividends while maintaining leverage(1) at 0.9x.”

The stock is up 14.6% since reporting and currently trades at $35.69.

Is now the time to buy Zurn Elkay? Access our full analysis of the earnings results here, it’s free.

Best Q1: AAON (NASDAQ: AAON)

Backed by two million square feet of lab testing space, AAON (NASDAQ: AAON) makes heating, ventilation, and air conditioning equipment for different types of buildings.

AAON reported revenues of $322.1 million, up 22.9% year on year, outperforming analysts’ expectations by 10.9%. The business had an incredible quarter with an impressive beat of analysts’ EPS estimates and a solid beat of analysts’ EBITDA estimates.

AAON scored the biggest analyst estimates beat and fastest revenue growth among its peers. The market seems content with the results as the stock is up 2.5% since reporting. It currently trades at $93.40.

Is now the time to buy AAON? Access our full analysis of the earnings results here, it’s free.

Weakest Q1: Advanced Drainage (NYSE: WMS)

Originally started as a farm water drainage company, Advanced Drainage Systems (NYSE: WMS) provides clean water management solutions to communities across America.

Advanced Drainage reported revenues of $615.8 million, down 5.8% year on year, falling short of analysts’ expectations by 6.8%. It was a disappointing quarter as it posted a miss of analysts’ Infiltrators revenue estimates and full-year revenue guidance missing analysts’ expectations significantly.

Advanced Drainage delivered the weakest performance against analyst estimates, slowest revenue growth, and weakest full-year guidance update in the group. As expected, the stock is down 9.5% since the results and currently trades at $110.14.

Read our full analysis of Advanced Drainage’s results here.

A. O. Smith (NYSE: AOS)

Credited with the invention of the glass-lined water heater, A.O. Smith (NYSE: AOS) manufactures water heating and treatment products for various industries.

A. O. Smith reported revenues of $963.9 million, down 1.5% year on year. This print beat analysts’ expectations by 1.1%. It was a strong quarter as it also logged an impressive beat of analysts’ EBITDA estimates and a solid beat of analysts’ organic revenue estimates.

The stock is down 1.9% since reporting and currently trades at $63.60.

Read our full, actionable report on A. O. Smith here, it’s free.

Lennox (NYSE: LII)

Based in Texas and founded over a century ago, Lennox (NYSE: LII) is a climate control solutions company offering heating, ventilation, air conditioning, and refrigeration (HVACR) goods.

Lennox reported revenues of $1.07 billion, up 2.4% year on year. This result topped analysts’ expectations by 4.6%. Overall, it was a very strong quarter as it also recorded a solid beat of analysts’ organic revenue estimates and a decent beat of analysts’ EPS estimates.

The stock is down 1.3% since reporting and currently trades at $551.78.

Read our full, actionable report on Lennox here, it’s free.

Market Update

The Fed’s interest rate hikes throughout 2022 and 2023 have successfully cooled post-pandemic inflation, bringing it closer to the 2% target. Inflationary pressures have eased without tipping the economy into a recession, suggesting a soft landing. This stability, paired with recent rate cuts (0.5% in September 2024 and 0.25% in November 2024), fueled a strong year for the stock market in 2024. The markets surged further after Donald Trump’s presidential victory in November, with major indices reaching record highs in the days following the election. Still, questions remain about the direction of economic policy, as potential tariffs and corporate tax changes add uncertainty for 2025.

Want to invest in winners with rock-solid fundamentals? Check out our Top 5 Quality Compounder Stocks and add them to your watchlist. These companies are poised for growth regardless of the political or macroeconomic climate.

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