Zurn Elkay Seems To Be Drifting Despite Solid Execution And Growth Opportunities Beyond 2022

Between a more general derating of previously high-multiple industrials and perhaps some rotation out of the once-hot water theme, Zurn Elkay (NYSE:ZWS) has remained weak since my last update on the company in February. Down about 10% since my last update, the stock has underperformed Watts (WTS) and Mueller (MWA), but the year-to-date comparison is a bit more favorable to Zurn Elkay.

I really don't see much to fret about here. I've been impressed with not only how Zurn Elkay has leveraged strong availability to gain share (as well as leveraging hygiene retrofit trends), but also how well margins have held up in a challenging cost environment. The outlook has faded some since my last update, but I'm still bullish on Zurn Elkay based on mid-single-digit long-term organic revenue growth and mid-to-high single-digit FCF growth.

 

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Zurn Elkay Seems To Be Drifting Despite Solid Execution And Growth Opportunities Beyond 2022