Xylem (XYL) Q3 Earnings & Revenues Beat, '23 View Upbeat
Xylem Inc.’s XYL third-quarter 2023 adjusted earnings (excluding 36 cents from non-recurring items) of 99 cents per share surpassed the Zacks Consensus Estimate of 89 cents. The bottom line increased in double digits year over year.
Xylem’s revenues of $2,076 million outperformed the Zacks Consensus Estimate of $1,986.1 million. The top line jumped 50.4% year over year due to strong commercial and operational execution and resilient demand. Organic sales in the quarter rose 10%.
Orders in the reported quarter increased 43% year over year. Organically, orders inched up 3%.
Xylem Inc. Price, Consensus and EPS Surprise
Xylem Inc. price-consensus-eps-surprise-chart | Xylem Inc. Quote
Segmental Details
From second-quarter 2023 onward, Xylem has introduced a new segment, Integrated Solutions & Services, to include the results of Evoqua, which it acquired in May 2023. The segment reported revenues of $368 million in the third quarter.
Revenues in the Water Infrastructure segment totaled $803 million, up 40% year over year. The Zacks Consensus Estimate for Water Infrastructure segment revenues was $757 million. Organic sales in the reported quarter increased 7% year over year, buoyed by price realization and robust utilities and industrial demand in the United States and resiliency in Western Europe.
The Applied Water segment generated revenues of $465 million in the third quarter, up 2% year over year. The Zacks Consensus Estimate for segmental revenues was $463 million for the quarter. Organic sales increased 1% on a year-over-year basis. The segmental performance benefited from strong price realization, backlog execution in U.S. building solutions and resilient industrial demand in developed markets.
Quarterly revenues at the Measurement & Control Solutions segment totaled $440 million, up 26% year over year. This compares with the Zacks Consensus Estimate of $410 million. Organic sales were up 25% year over year due to backlog execution in smart metering and test and measurement.
Margin Profile
In the reported quarter, Xylem’s adjusted EBITDA was $411 million, up 63.1% from the year-ago quarter’s level. The margin in the quarter improved to 19.8% compared with 18.3% in the year-ago period.
Operating income was $128 million in the quarter under review, reflecting an increase of 23.1% from the year-ago reported figure. Operating margin deteriorated to 15.9% from 18.1% in the year-ago period.
Balance Sheet and Cash Flow
Exiting the third quarter, Xylem had cash and cash equivalents of $705 million compared with $944 million at the end of December 2022. Long-term debt was $2,253 million at the end of the third quarter of 2023 compared with $1,880 million at the end of December 2022.
At the end of the third quarter of 2023, Xylem generated net cash of $382 million from operating activities compared with $234 million at the end of December 2022. Capital expenditure was $177 million, up 19.6% from the year-ago period. Free cash flow was $238 million in the first nine months of 2023 compared with $86 million in the year-ago period.
Rewards to Shareholders
In the first nine months of 2023, Xylem, carrying a Zacks Rank #3 (Hold), paid dividends of $219 million, up 34.4% year over year. The company also bought back shares worth $10 million in the same period compared with $52 million worth of shares repurchased in the year-ago period. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks.
2023 Guidance Improved
Xylem has raised its 2023 guidance. The company now expects revenues of approximately $7.3 billion for 2023. This indicates a year-over-year increase of 32% on a reported basis and around 11% on an organic basis. Previously, the company expected the same to increase 30% on a reported basis and 9-10% on an organic basis. The Zacks Consensus Estimate for the company’s total revenues in 2023 stands at $7.2 billion.
Adjusted EBITDA margin is estimated to be approximately 19% for 2023 compared with 18% anticipated earlier. XYL expects adjusted earnings of $3.71-$3.73 per share compared with $3.50-$3.70 anticipated earlier. The Zacks Consensus Estimate for the company’s earnings in 2023 is pegged at $3.64.
Performance of Other Industrial Companies
Cimpress plc CMPR reported first-quarter fiscal 2024 (ended Sep 30, 2023) adjusted earnings of 17 cents per share, which surpassed the Zacks Consensus Estimate of a loss of 34 cents per share. The company incurred a loss of 97 cents per share in the year-ago quarter.
Cimpress’ total revenues of $757.3 million missed the Zack Consensus Estimate of $771 million. The top line increased 7.7% year over year, driven by growth across most of its businesses.
Stanley Black & Decker SWK reported third-quarter 2023 adjusted earnings (excluding $1.02 from non-recurring items) of $1.05 per share, which beat the Zacks Consensus Estimate of 84 cents. The bottom line jumped 38.2% year over year due to lower costs.
Stanley Black’s net sales of $3,953.9 million missed the Zacks Consensus Estimate of $4,019.3 million. The top line also declined 4% year over year due to weakness in the Tools & Outdoor segment.
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