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Why Is Xylem (XYL) Up 1.7% Since Last Earnings Report?
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A month has gone by since the last earnings report for Xylem (XYL - Free Report) . Shares have added about 1.7% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Xylem due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Xylem’s second-quarter 2024 adjusted earnings of $1.09 per share surpassed the Zacks Consensus Estimate of $1.06. Also, the bottom line increased 11% year over year.
XYL’s revenues of $2.17 billion beat the consensus estimate of $2.16 billion. The top line jumped 26% year over year, driven by strong commercial and operational execution, and resilient demand. Organic revenues in the quarter rose 9%.
Orders of $2.09 billion increased 12% year over year. Organically, orders were down 1%.
Segmental Details
Revenues in the Water Infrastructure segment totaled $631 million, up 22% year over year. Organic sales increased 7% year over year, buoyed by price realization and growth across all regions and applications.
The Applied Water segment generated revenues of $456 million, down 5% year over year. Organic sales fell 4% on a year-over-year basis. The segmental performance was hurt by softness in developed markets and an unfavorable mix. The Zacks Consensus Estimate was pegged at $453 million.
Quarterly revenues at the Measurement & Control Solutions segment totaled $482 million, up 26% year over year. The Zacks Consensus Estimate was pegged at $470 million. Organic sales were up 26% year over year, driven by smart metering demand and execution.
Quarterly revenues at the Water Solutions and Services segment totaled $600 million, up 76% year over year. Organic sales were up 12% year over year, driven by large long-term outsourced water contracts.
Margin Profile
Xylem’s adjusted EBITDA was $452 million, up 37.3% from the year-ago quarter’s level. The margin improved to 20.8% from 19.1% in the prior year.
Adjusted operating income was $352 million, up 35.9% year over year. Adjusted operating margin increased to 16.2% from 15% in the year-earlier quarter.
Balance Sheet and Cash Flow
Exiting the second quarter, Xylem had cash and cash equivalents of $815 million compared with $1.02 billion at the end of December 2023. Long-term debt was $1.98 billion at the end of the quarter compared with $2.3 billion at the end of December 2023.
In the first six months of 2024, XYL generated net cash of $377 million from operating activities compared with $9 million generated in the year-ago period.
Capital expenditure was $147 million, up 42.7% from the year-earlier quarter. Free cash flow was $230 million in the first six months of the year against free cash outflow of $61 million in the prior year.
Rewards to Shareholders
In the first six months of 2024, Xylem paid dividends of $175 million, up 25.9% year over year. The company also bought back shares worth $18 million in the same period compared with $9 million worth of shares repurchased in the year-ago period.
2024 Guidance
Xylem now expects revenues of approximately $8.55 billion for 2024. This indicates an increase of 16% from the prior-year level on a reported basis and around 5-6% on an organic basis. Previously, the company projected revenues to increase 15-16% on a reported basis and 4-6% on an organic basis.
Adjusted EBITDA margin is estimated to be approximately 20.5%, indicating an expansion of 160 basis points from the year-earlier actual.
XYL currently forecasts adjusted earnings to be in the range of $4.18-$4.28 per share, higher than the band of $4.10-$4.25 projected earlier. This metric indicates an increase from earnings of $3.78 per share in 2023. Free cash flow conversion to net income is anticipated to be around 120%.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
VGM Scores
At this time, Xylem has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions has been net zero. Notably, Xylem has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is Xylem (XYL) Up 1.7% Since Last Earnings Report?
A month has gone by since the last earnings report for Xylem (XYL - Free Report) . Shares have added about 1.7% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Xylem due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Xylem Q2 Earnings & Revenues Beat, '24 View Raised
Xylem’s second-quarter 2024 adjusted earnings of $1.09 per share surpassed the Zacks Consensus Estimate of $1.06. Also, the bottom line increased 11% year over year.
XYL’s revenues of $2.17 billion beat the consensus estimate of $2.16 billion. The top line jumped 26% year over year, driven by strong commercial and operational execution, and resilient demand. Organic revenues in the quarter rose 9%.
Orders of $2.09 billion increased 12% year over year. Organically, orders were down 1%.
Segmental Details
Revenues in the Water Infrastructure segment totaled $631 million, up 22% year over year. Organic sales increased 7% year over year, buoyed by price realization and growth across all regions and applications.
The Applied Water segment generated revenues of $456 million, down 5% year over year. Organic sales fell 4% on a year-over-year basis. The segmental performance was hurt by softness in developed markets and an unfavorable mix. The Zacks Consensus Estimate was pegged at $453 million.
Quarterly revenues at the Measurement & Control Solutions segment totaled $482 million, up 26% year over year. The Zacks Consensus Estimate was pegged at $470 million. Organic sales were up 26% year over year, driven by smart metering demand and execution.
Quarterly revenues at the Water Solutions and Services segment totaled $600 million, up 76% year over year. Organic sales were up 12% year over year, driven by large long-term outsourced water contracts.
Margin Profile
Xylem’s adjusted EBITDA was $452 million, up 37.3% from the year-ago quarter’s level. The margin improved to 20.8% from 19.1% in the prior year.
Adjusted operating income was $352 million, up 35.9% year over year. Adjusted operating margin increased to 16.2% from 15% in the year-earlier quarter.
Balance Sheet and Cash Flow
Exiting the second quarter, Xylem had cash and cash equivalents of $815 million compared with $1.02 billion at the end of December 2023. Long-term debt was $1.98 billion at the end of the quarter compared with $2.3 billion at the end of December 2023.
In the first six months of 2024, XYL generated net cash of $377 million from operating activities compared with $9 million generated in the year-ago period.
Capital expenditure was $147 million, up 42.7% from the year-earlier quarter. Free cash flow was $230 million in the first six months of the year against free cash outflow of $61 million in the prior year.
Rewards to Shareholders
In the first six months of 2024, Xylem paid dividends of $175 million, up 25.9% year over year. The company also bought back shares worth $18 million in the same period compared with $9 million worth of shares repurchased in the year-ago period.
2024 Guidance
Xylem now expects revenues of approximately $8.55 billion for 2024. This indicates an increase of 16% from the prior-year level on a reported basis and around 5-6% on an organic basis. Previously, the company projected revenues to increase 15-16% on a reported basis and 4-6% on an organic basis.
Adjusted EBITDA margin is estimated to be approximately 20.5%, indicating an expansion of 160 basis points from the year-earlier actual.
XYL currently forecasts adjusted earnings to be in the range of $4.18-$4.28 per share, higher than the band of $4.10-$4.25 projected earlier. This metric indicates an increase from earnings of $3.78 per share in 2023. Free cash flow conversion to net income is anticipated to be around 120%.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
VGM Scores
At this time, Xylem has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions has been net zero. Notably, Xylem has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.