Baird has adjusted its outlook on Zurn Water Solutions (NYSE: ZWS), raising the price target to $37 from $36 while maintaining a Neutral rating on the stock.
The firm noted that Zurn Water's recent performance aligned with its preliminary announcement, showing a slight increase in sales and margins.
Additionally, the company's management has upgraded its 2024 guidance based on better-than-expected margin results.
The company's end markets are developing as anticipated, with strong growth in the Drinking Water sector balancing out the stagnant or slightly declining performance in other areas of the portfolio.
A recent change in leadership at Zurn Water Solutions is expected to offer more flexibility within the company. Furthermore, the firm's solid balance sheet positions it well for strategic capital deployment.
Baird's report also notes that Zurn Water Solutions has shown commendable internal execution amidst a varied market environment. This has been a contributing factor to the gradual increase in estimates, driven by the company's margin execution.
Zurn reported strong growth in its second-quarter performance, with a 20% increase in adjusted EBITDA and significant margin expansion, with core growth marked at 3%. Zurn Elkay generated $80 million in free cash flow and repurchased nearly 2 million shares, contributing to an EBITDA increase of $35 million for the first half of the year. It also surpassed $250 million in free cash flow for the full year.
InvestingPro Insights
Baird's recent appraisal of Zurn Water Solutions (NYSE:ZWS) is bolstered by additional insights from InvestingPro. The company is poised for a promising year ahead, with analysts revising earnings estimates upwards, suggesting confidence in Zurn Water's financial trajectory. This optimism is reflected in the company's stock performance, which has demonstrated a strong return over the last month.
InvestingPro Data indicates that Zurn Water Solutions holds a market capitalization of $5.55 billion, with a forward-looking P/E ratio of 37.84, which is considered low relative to its near-term earnings growth. The company's revenue has seen a modest growth of 0.5% over the last twelve months as of Q2 2024. Furthermore, Zurn Water's gross profit margin stands at an impressive 44.27%, highlighting efficient operations and profitability within the same period.
InvestingPro Tips suggest that Zurn Water's liquid assets surpass short-term obligations, providing financial flexibility for strategic investments or to weather economic downturns. Additionally, the company operates with a moderate level of debt, which is a positive sign for potential investors looking for a stable investment.
For those interested in further analysis and additional InvestingPro Tips, there are 9 more listed on the InvestingPro platform, which can provide deeper insights into Zurn Water Solutions' financial health and market position.
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