Zurn Elkay Water Solutions Corporation (ZWS): BCG Matrix [Dec-2025 Updated]

You're looking at Zurn Elkay Water Solutions Corporation's portfolio right now, and frankly, it's a mix of clear winners and areas needing a hard look before year-end. As a seasoned analyst, I see the engine room-the Cash Cows-generating over $300 million in Free Cash Flow and boasting a 26.8% Adjusted EBITDA margin, which is solid, while the Stars, like hygienic solutions, are already growing at 11% in Q3. Still, we need to decide what to do with those Question Marks in residential and international growth, and where to pull the plug on the Dogs, like those legacy sink lines, to keep capital focused. Dive in below to see exactly where Zurn Elkay Water Solutions Corporation is winning and where it needs to pivot its investment strategy for 2026.

Background of Zurn Elkay Water Solutions Corporation (ZWS)

You're looking at Zurn Elkay Water Solutions Corporation (ZWS), a company that has been around since 1891, though it took on its current name in July 2022 after the merger that combined Zurn Water Solutions and Elkay. Honestly, the core of what Zurn Elkay does is design, procure, manufacture, and market specialized water management solutions. They focus on improving health, human safety, and the environment through specification-driven products, which means architects and engineers often call for their specific items in building plans. The company is headquartered in Milwaukee, Wisconsin, and operates primarily in the Building Products industry.

To get a sense of where Zurn Elkay stands as of late 2025, let's look at the numbers. For the third quarter ending September 30, 2025, net sales hit $455 million, marking an 11% core sales growth year-over-year. That strong quarter helped management raise the full-year 2025 guidance; they now anticipate adjusted EBITDA to land between $437 million and $440 million, up from earlier projections. Furthermore, they expect full-year free cash flow to be greater than $300 million, which is a solid sign of operational strength. For the trailing twelve months ending September 30, 2025, Zurn Elkay Water Solutions reported revenue totaling $1.66 billion.

The product portfolio is quite broad, covering everything from water flow control to conservation. You'll find professional-grade water safety and control products, flow systems, hygienic and environmental products, and filtered drinking water solutions. They market these through established brands like Zurn, Wilkins, Elkay, and Halsey Taylor. Zurn Elkay serves a diverse customer base across institutional, commercial, waterworks, and residential end markets, with specific focus areas including healthcare, education, hospitality, and general commercial construction. They defintely have a wide reach across North America.

Zurn Elkay Water Solutions Corporation (ZWS) - BCG Matrix: Stars

The Stars quadrant represents Zurn Elkay Water Solutions Corporation (ZWS) business units operating in markets with high growth potential where the company maintains a leading market share. These units require significant investment to maintain their growth trajectory and market position, often resulting in cash flow neutrality or slight positive generation, but they are the future Cash Cows.

Commercial Drinking Water Solutions, anchored by the Elkay brand, fits this profile, capitalizing on secular trends for cleaner, accessible hydration in nonresidential settings. This segment benefits from a market where the water treatment system segment is projected to grow at an 8.1% Compound Annual Growth Rate (CAGR) through 2030. Furthermore, Zurn Elkay Water Solutions is recognized for having the broadest sustainable product portfolio, which underpins its market leadership claims.

The focus on hygienic and hands-free plumbing products directly addresses sustained post-pandemic health and safety priorities across commercial and institutional construction. This is evidenced by the company's overall strong top-line performance, which reflects volume increases across all product categories.

The latest reported financial performance clearly demonstrates the high-growth characteristic of the Stars segment. Zurn Elkay Water Solutions Corporation reported third quarter 2025 results showing net sales of $455 million, which translated to a 11% core sales growth year-over-year. This growth rate is a key indicator of a high-growth market or strong competitive positioning.

The company's strategic focus on specified solutions for critical verticals like education and healthcare is a direct play on market leadership. While the Elementary and Secondary School Emergency Relief (ESSER) funds' obligation deadline was September 30th, 2024, with final spending by January 28th, 2025, the installed base and resulting demand for maintenance and future upgrades remain a tailwind. For example, Zurn Elkay Water Solutions donated 50 Elkay filtered bottle filling stations to Erie's Public Schools in May 2025 for installation across nine elementary schools, showcasing direct engagement in the education vertical.

Here's a look at the key financial metrics from the third quarter of 2025 that support the high-growth, high-share positioning of the Star segment:

The commitment to investment is visible in the full-year outlook, where Zurn Elkay Water Solutions expects full year core sales growth of about 8% and an Adjusted EBITDA range of $437 million to $440 million, signaling continued resource allocation to these leading areas. The company also stated an investment target of a total of $90 million by 2025 in engineering and R&D to enhance the sustainable aspects of its products, which directly feeds the growth engine of the Star portfolio.

The product innovation supports the high-share claim, especially in filtered water. For instance, the new HighCapacity Replacement Filter (51600C) doubles filter life to 6,000 gallons, reducing total cost of ownership and simplifying maintenance, which drives adoption and retention in commercial placements. The portfolio is designed to capture demand from secular trends:

• Sustainable Revenue Base: 86% of revenue derived from products with sustainable attributes as of 2024.
• Product Certification: Commercial-grade WaterSentry® filters reduce the most contaminants, certified to NSF/ANSI 42, 53, and 401.
• Market Focus: Strong execution in the nonresidential market.
• Capital Allocation: Deployed $25 million in Q3 2025 for share repurchases, signaling confidence in future cash flow conversion from these growth assets.

Zurn Elkay Water Solutions Corporation (ZWS) - BCG Matrix: Cash Cows

You're looking at the bedrock of Zurn Elkay Water Solutions Corporation's financial stability, the units that print money without needing massive reinvestment. These are the Cash Cows, the established market leaders in mature segments.

Legacy Zurn commercial water control and safety products fit squarely here, holding a dominant market share position built over decades. Also contributing are the core commercial drainage and water distribution systems; these are essential, replacement-driven products that provide a steady, non-cyclical revenue stream.

These mature lines are high-margin and generate substantial Free Cash Flow. The company projected full-year 2025 Free Cash Flow to be greater than $300 million. Honestly, that kind of cash generation is what fuels the entire operation.

The operational efficiency supporting this is clear in the recent results. The Adjusted EBITDA margin for the third quarter of 2025 hit 26.8%, which reflects strong pricing power and the benefits of the Zurn Elkay Business System driving productivity.

Because the market growth is low, promotion and placement investments are minimal for these brands. Instead, Zurn Elkay Water Solutions focuses investments on supporting infrastructure to improve efficiency and further boost that cash flow. Here's a quick look at the recent performance metrics that define this segment's strength:

The company is actively 'milking' these gains. For instance, in Q3 2025, Free Cash Flow was $94 million, which helped reduce net debt leverage to a record low of 0.6x. This financial strength allows for capital returns, like the 22% annual dividend increase to $0.44 per share, and a refreshed share repurchase authorization up to $500 million.

These Cash Cows provide the financial muscle for Zurn Elkay Water Solutions Corporation to manage other parts of its portfolio. You can see the direct impact of this segment's performance in the capital allocation flexibility it buys:

• The ability to fund growth initiatives in other segments.
• Funding for administrative costs and corporate debt servicing.
• Support for the 22% increase in the annual dividend.
• Authorization for up to $500 million in share repurchases.
• Elimination of approximately a $200 million U.S. pension liability.

The Q3 2025 sales came in at $455 million, showing that even in a mature market, execution on specification-driven products keeps the cash flowing strongly. Finance: draft 13-week cash view by Friday.

Zurn Elkay Water Solutions Corporation (ZWS) - BCG Matrix: Dogs

You're looking at the parts of Zurn Elkay Water Solutions Corporation that aren't driving the high growth seen in the core business. These are the areas where market share is low, growth is stagnant or negative, and management is actively minimizing exposure or harvesting capital. For Zurn Elkay Water Solutions Corporation, these Dogs are primarily found within the residential segment that is not aligned with the newer, specification-driven pure-play water strategy.

Certain legacy residential sink products serve as a prime example of a Dog category. The company has been actively managing the exit from these lines. For instance, in the full year 2024 results, the planned exit of these certain residential sink products had a measurable negative impact, accounting for a 100 basis point drag on the reported core sales growth of 3% for that year. This action signals a clear strategy to shed low-share, low-growth legacy items.

The broader residential market context supports the classification of some products here as Dogs. Management noted during the Q2 2025 earnings call that the residential market is experiencing a modestly weaker environment, even though it represents a smaller piece of our business compared to the stronger nonresidential segments. This environment naturally places lower-performing residential SKUs into the Dog quadrant, as they operate in a low-growth space with likely low relative market share.

The strategic pivot toward a pure-play water management business post-merger means that non-core product lines are candidates for elimination or isolation. While a major divestiture of subsidiaries holding asbestos liabilities occurred in December 2023 to Zilco Holdings, Inc., this action demonstrates the commitment to removing legacy liabilities that do not fit the growth-oriented, specification-driven portfolio. This historical action sets the precedent for how Zurn Elkay Water Solutions Corporation treats non-core assets.

Capital deployment figures clearly show where Zurn Elkay Water Solutions Corporation is redirecting resources away from potential Dogs. The company is actively harvesting capital from its overall operations, which can be seen as extracting cash from lower-growth areas to fund Stars and Question Marks. In the third quarter of 2025, the company generated $94 million in free cash flow and deployed $135 million year-to-date in share repurchases, alongside a 22% increase in the annual dividend to $0.44 per share. This focus on returning capital and reducing leverage to 0.6x by the end of Q3 2025 suggests minimal new investment in low-return segments.

Here is a snapshot of the financial context framing the overall portfolio as of late 2025:

The characteristics of Dogs-low market share and low growth-mean they frequently break even, neither earning nor consuming much cash, but they tie up capital. For Zurn Elkay Water Solutions Corporation, the active management of the residential sink product exit and the stated softness in the residential market point directly to where these units reside. The strategy is to avoid expensive turn-around plans and instead harvest or redirect capital, as evidenced by the robust share repurchase program of up to $500 million refreshed by the Board.

The key indicators pointing to Dog status are:

• Planned exit of certain residential sink products.
• Residential market described as modestly weaker.
• Negative impact of 100 basis points on 2024 core sales from product exits.
• Focus on specification-driven, pure-play water solutions, sidelining legacy items.
• Capital deployment prioritizing buybacks (YTD $135 million) over investment in low-growth areas.

Finance: draft 13-week cash view by Friday.

Zurn Elkay Water Solutions Corporation (ZWS) - BCG Matrix: Question Marks

You're looking at the parts of Zurn Elkay Water Solutions Corporation that are in high-growth areas but haven't yet secured a dominant position. These are the units that demand cash now for market penetration, hoping to become tomorrow's Stars. Honestly, these are the biggest strategic gambles in the portfolio right now.

The initiatives fitting this profile-new residential products, international pushes, and smart solutions-are likely housed within the segment that is not the core Institutional or Commercial business. For the second quarter of 2025, the All other segment generated net sales of $101.10 million out of total net sales of $444.5 million. This smaller segment is where the high-growth, low-share bets are placed, consuming capital for future market capture.

The overall business showed strong momentum in the first half of 2025, with core sales growing 8% year-over-year in Q2 2025. This market growth provides the high-growth environment necessary for a Question Mark to thrive, but only if Zurn Elkay Water Solutions Corporation can quickly capture share.

Here's a look at the sales breakdown for the quarter that gives context to where these Question Marks sit:

The specific focus areas for investment and market share gain include:

• Elkay Liv built-in filtered bottle fillers for the residential market.
• New product introductions targeting the residential market, a smaller piece of the business.
• International expansion initiatives where Zurn Elkay Water Solutions Corporation has lower market share but is targeting high-growth regions.
• New, innovative digital water management or smart-building solutions that require significant R&D investment to gain traction.

Regarding the residential focus, management noted that the residential market was identified as experiencing softness in Q2 2025, which is a near-term risk for any Question Mark product line. However, the company is actively refreshing its offering, highlighting the launch of Elkay Pro Filtration as a major refresh to the bottle filler category. This investment is the required heavy lift to move this product from Question Mark to Star status.

For international expansion and digital solutions, specific revenue or R&D spend figures are not itemized separately from the main segments in the public reports. What is clear is the strategic shift in supply chain, with management reiterating the commitment to reduce supply chain exposure to China to less than 2% to 3% of cost of goods sold by the end of 2026. This restructuring itself is a major cash consumer, which indirectly impacts the capital available for these Question Mark initiatives.

The overall financial health supports investment, as the company raised its full-year 2025 guidance, projecting core sales growth of at least 5% and Adjusted EBITDA between $420 million and $430 million. Furthermore, free cash flow exceeded $100 million in Q2 2025 for the first time, reaching $102 million, and the full-year 2025 free cash flow expectation was raised to approximately $300 million. This strong cash generation provides the necessary fuel to invest heavily in these Question Marks to gain market share quickly, or risk them becoming Dogs.