Oct 28, 2026 earnings call — Runpoint hot water adjacency and Q3 results
Q3 sales were $95 million, up 9% year over year and 7% core growth.
Revenue $0.5B (est $0.5B) · EPS $0.52 (est $0.50) · Next-quarter revenue outlook $0.4B–$0.4B
Key quotes
"In addition to that, we continue to generate significant free cash flow, which we use to invest in Zurn Elkay stock, repurchasing $35 million of stock in the quarter."
"The combination of our core portfolio, competitive position and our go-to-market strength are why we believe mixing valves can become a $50 million category for us over the long run."
"This end market represents approximately 50% of Zurn Elkay's exposure and contains a number of public building types, education, health care, together combining the majority of the Dodge institutional starts at 57%."
Analyst Q&A 5
Why growth slowed to 7%
Q (Bryan Blair · Oppenheimer): Was the slowdown to 7% core growth just from price changes versus volume slowing? Also, did the hot water product area influence the decision to state a 40% incremental margin target?
A: Management said price was the biggest driver and the market softening was expected. They said the 40% incremental margin target comes from the core business today. The hot water category should help margins but is not the main reason for that target.
"I would say that the 40% and the adoption of that, if that is what you want to call it, really comes from our core business as it sits today." — Todd A. Adams (CEO·CHAIR)
Long-term growth and adjacencies
Q (Jae Hyun Ko · Jefferies): Could the market become a tailwind as education and health care improve, and with new adjacencies can growth exceed the past five years? How many new product categories are coming in 2027 and when do you develop versus buy?
A: Management said if the Dodge market projection comes true, it would be the first tailwind in a long time and would help growth. They said adjacencies that enter those same subverticals could give a double benefit, but it is too early to be certain. For 2027 they expect categories in the $100 million to $200 million range and will continue to both develop and acquire on a case-by-case basis.
"In categories in the $100 million to $200 million range, and there will be more of those as we head into 2027." — Todd A. Adams (CEO·CHAIR)
Pricing plans and regional trends
Q (Adam Farley · Stifel): Should we expect more price increases this year or in 2027? And are any U.S. regions showing relative strength or weakness?
A: Management said they are not yet guiding for 2027 and to think of pricing as done in the regular course. They said no incremental price is assumed for the fourth quarter but they have a price increase teed up for next year. On regions, they said construction is hyperlocal and noted strength in the Northeast, Gulf Region and West, and that their regional rep networks have helped take share.
"We do not have any incremental price assumed in our fourth quarter." — Todd A. Adams (CEO·CHAIR)
Hot water product pipeline and weak markets
Q (Jeffrey Hammond · KeyBanc): How far along is the pipeline for new hot water products and adjacencies? And have you seen any market weakening or project delays from recent rate moves?
A: Management said they have been building internal resources and cultivating many projects, and those efforts are at various stages. They expect a mix of products under development, things being worked, and items coming to market, with more expected in 2027. On markets, they said Water Safety and Drinking Water had good quarters, residential is weaker, and they have not seen unusual deferrals beyond what they expected.
"So I think it is always gonna be a combination, Jeffrey, of stuff that is under development and stuff that is being worked, and stuff that ideally is coming to market." — Todd A. Adams (CEO·CHAIR)
Backlog timing and services plan
Q (Jeffrey Reive · RBC): Are projects taking longer and could that change shipment timing? On services for the hot water loop, what specific services will you add?
A: Management said they would not view current backlog changes as affecting shipment timing and that some delays seen were within their planning assumptions for a softer back half. For services, they plan to build and use the Intellihot Intelli-Pro network and their rep networks to support commissioning and troubleshooting, and to help contractors as they add products over time.
"I would not necessarily view it from the standpoint of timing of shipments." — David Pauli (COO)