On Friday, Oppenheimer upgraded his outlook on Zurn Water Solutions (NYSE:ZWS) shares, raising his price target to $37 from $36 previously, while maintaining an Outperform rating on the stock.
The company’s analysis suggests that Zurn Elkay’s growth potential for the years 2024-25 is not fully recognized by the market. This outlook is strengthened by a strong pipeline of institutional projects and consistent double-digit growth in the drinking water platform.
The company, which sees about half its demand from institutional sources, should benefit from easier comparative data and positive signals in residential applications, which account for about 15% of sales.
Additionally, potential stimulus from the Infrastructure Investment and Jobs Act (IIJA) is expected to contribute to revenue growth in the waterworks industry, which represents approximately 8% of sales. These factors are expected to offset any weaknesses in the commercial sectors and support a continued acceleration of core growth in the coming quarters.
Oppenheimer highlights the likelihood that Zurn Water Solutions will return to mergers and acquisitions, which could further improve the company’s growth trajectory in the short to medium term. The company’s positive attitude is also supported by the improvement of Zurn’s quality parameters. This comprehensive view of the company’s outlook and performance metrics is behind the increase in the price target to $37.
Insights on InvestingPro
As Zurn Water Solutions (NYSE: ZWS) continues to navigate 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 is in line with the Tip for InvestingPro highlighting the company’s expected net income growth this year and its low P/E ratio ahead of this expected earnings surge.
InvestingPro data indicates robust revenue growth of 19.4% over the trailing twelve months as of the fourth quarter of 2023, with a gross profit margin of 42.35%, demonstrating the company’s ability to maintain profitability. Furthermore, Zurn has shown a strong performance over the past year, with a total price return of 57.13%, reflecting investor confidence and market performance.
For readers who want to delve deeper into Zurn Water Solutions’ financial health and future prospects, there are more Professional investment tips available, including information on 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% discount on an annual or two-year Pro and Pro+ subscription. There are 9 in total InvestirePro Suggestions which can help investors make more informed decisions.
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