Xylem (XYL) Q4 Earnings & Revenues Beat, Dividend Hiked
Xylem Inc.’s XYL fourth-quarter 2023 adjusted earnings of 99 cents per share surpassed the Zacks Consensus Estimate of 96 cents. However, the bottom line decreased 1% year over year.
Xylem’s revenues of $2.12 billion outperformed the Zacks Consensus Estimate of $2.06 billion. The top line jumped 41% year over year, driven by strong commercial and operational execution and resilient demand. Organic sales in the quarter rose 9%.
Orders in the reported quarter increased 42% year over year. Organically, orders were up 10%.
Segmental Details
From second-quarter 2023 onward, Xylem introduced a new segment, Integrated Solutions & Services, to include the results of Evoqua, which it acquired in May 2023. The segment reported revenues of $322 million in the fourth quarter.
Revenues in the Water Infrastructure segment totaled $871 million, up 30.4% year over year. The Zacks Consensus Estimate for Water Infrastructure segment revenues was $829 million. Organic sales in the reported quarter increased 9% year over year, buoyed by price realization and robust treatment demand globally.
The Applied Water segment generated revenues of $457 million in the quarter, flat year over year. The Zacks Consensus Estimate for segmental revenues was $458 million for the quarter. Organic sales were flat on a year-over-year basis. The segmental performance benefited from solid price realization and resilient industrial demand in emerging markets and Europe, offset by lower volume.
Quarterly revenues at the Measurement & Control Solutions segment totaled $468 million, up 22% year over year. This compares with the Zacks Consensus Estimate of $444 million. Organic sales were up 21% year over year due to solid metrology demand and backlog execution.
Xylem Inc. Price, Consensus and EPS Surprise
Xylem Inc. price-consensus-eps-surprise-chart | Xylem Inc. Quote
Margin Profile
In the reported quarter, Xylem’s adjusted EBITDA was $ 416 million, up 48% from the year-ago quarter’s level. The margin in the quarter improved to 19.6% compared with 18.7% in the year-ago period.
Operating income was $211 million in the quarter under review, indicating an increase of 7.1% from the year-ago reported figure. Operating margin deteriorated to 10% from 13.1% in the year-ago period.
Balance Sheet and Cash Flow
Exiting the fourth quarter, Xylem had cash and cash equivalents of $1.02 billion compared with $944 million at the end of December 2022. Long-term debt (net) was $2.3 billion at the end of 2023 compared with $1.9 billion at the end of December 2022.
In 2023, Xylem generated net cash of $ 837 million from operating activities compared with $596 million in 2022. Capital expenditure was $271 million, up 30.3% from the year-ago period. Free cash flow was $599 million in 2023 compared with $388 million in the year-ago period.
Rewards to Shareholders
In 2023, Xylem paid dividends of $299 million, up 37.8% year over year. The company also bought back shares worth $25 million in the same period compared with $52 million worth of shares repurchased in the year-ago period.
Dividend Hike
Xylem’s board announced a dividend hike of 9% to 36 cents per share (annually: $1.44). The first installment of the dividend is payable to shareholders on Mar 20, of record as of Feb 21.
2024 Guidance
Xylem now expects revenues of approximately $8.4-$8.5 billion for 2024. This indicates a year-over-year increase of 14-15% on a reported basis and around 3-5% on an organic basis.
Adjusted EBITDA margin is estimated to be approximately 19.4-19.9% for 2024, indicating an expansion of 50 to 100 basis points year over year. XYL expects adjusted earnings of $4.00-$4.20 per share compared with $3.78 reported in 2023. For the year, free cash flow conversion to net income is anticipated to be around 115%.
Zacks Rank and Industrial Companies
XYL currently carries a Zacks Rank #3 (Hold). Here are some better-ranked stocks from the same space:
IDEX Corporation IEX presently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
IDEX delivered a trailing four-quarter average earnings surprise of 4.9%. In the past 60 days, the Zacks Consensus Estimate for IEX’s 2023 earnings has been stable.
Flowserve Corporation FLS presently carries a Zacks Rank of 2. FLS delivered a trailing four-quarter average earnings surprise of 27.3%. In the past 60 days, the Zacks Consensus Estimate for Flowserve’s 2023 earnings has remained steady.
Applied Industrial Technologies, Inc. AIT presently carries a Zacks Rank #2. It has a trailing four-quarter average earnings surprise of 10.4%. The Zacks Consensus Estimate for AIT’s fiscal 2024 (ending June 2024) earnings remained steady in the past 60 days.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Flowserve Corporation (FLS) : Free Stock Analysis Report
Applied Industrial Technologies, Inc. (AIT) : Free Stock Analysis Report
IDEX Corporation (IEX) : Free Stock Analysis Report
Xylem Inc. (XYL) : Free Stock Analysis Report
