On Friday, Oppenheimer has updated its outlook on Zurn Water Solutions (NYSE: ZWS) shares, increasing the price target to $37 from the previous $36 while maintaining an Outperform rating on the stock.
The firm's analysis suggests that Zurn Elkay's growth potential for the years 2024-25 is not fully recognized by the market. This perspective is bolstered by a strong pipeline of institutional projects and consistent double-digit growth in the drinking water platform.
The company, which sees about half of its demand from institutional sources, is expected to benefit from easier comparative figures and positive signs in residential applications, which make up around 15% of sales.
Additionally, potential boosts from the Infrastructure Investment and Jobs Act (IIJA) are anticipated to contribute to revenue growth in waterworks, which accounts for approximately 8% of sales. These factors are projected to compensate for any weaknesses in commercial sectors and underpin a steady acceleration in core growth in the forthcoming quarters.
Oppenheimer highlights the likelihood of Zurn Water Solutions returning to bolt-on mergers and acquisitions, which could further enhance the company's growth trajectory in the near to medium term. The firm's positive stance is also supported by Zurn's improving quality metrics. This comprehensive view of the company's prospects and performance metrics underpins raising the price target to $37.
InvestingPro Insights
As Zurn Water Solutions (NYSE: ZWS) continues to navigate through a landscape of growth opportunities and challenges, the latest data from InvestingPro provides a deeper financial perspective. With a market capitalization of $5.57 billion, Zurn is trading at a forward P/E ratio of 44.92, which is considered low relative to its near-term earnings growth potential. This aligns with the InvestingPro Tip highlighting the company's anticipated net income growth this year and its trading at a low P/E ratio in view of this expected uptick in earnings.
InvestingPro data indicates a robust revenue growth of 19.4% over the last twelve months as of Q4 2023, with a gross profit margin of 42.35%, demonstrating the company's ability to maintain profitability. Additionally, Zurn has shown a strong return over the last year, with a 57.13% price total return, reflecting investor confidence and market performance.
For readers looking to delve further into Zurn Water Solutions' financial health and future prospects, there are additional InvestingPro Tips available, including insights into the company's debt levels, liquidity, and long-term profitability. To access these insights and optimize your investment strategies, visit https://www.investing.com/pro/ZWS and consider using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. In total, there are 9 InvestingPro Tips that can help investors make more informed decisions.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.