Zurn Elkay Water Solutions’ Review Following 22% Stock Decline Since Q2 Results

Zurn Elkay Water Solutions Corporation (NYSE:ZWS) shares are down around 22% since the company’s Q2 earnings release, with broad market pressure exacerbated by lowered near-term Elkay guidance.

Analysts at Oppenheimer provided their views on the company, noting that they understand investor concerns/pushback regarding the reset of near-term merger expectations, but view the severity of share weakness as materially overdone given the strong setup for core Zurn and still-compelling strategic and medium-term financial upside of the Zurn-Elkay combination.

The analysts anticipate Zurn Elkay will prove resilient over the coming quarters, and consider the company’s valuation excessively discounted given the quality/growth prospects of the combined entity.

The analysts maintained their 2022 EBITDA estimate of $280 million and slightly lowered their 2023 EBITDA estimate to $385 million from $387 million.