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Xylem (XYL) Tops Q4 Earnings Estimates, Hurt by Supply Woes

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Xylem Inc. (XYL - Free Report) has reported better-than-expected results for fourth-quarter 2021.The company’s earnings surpassed the Zacks Consensus Estimate by 1.61%, whereas sales beat the same by 2.29%.

Adjusted earnings in the quarter under review were 63 cents per share, surpassing the Zacks Consensus Estimate of 62 cents. However, the bottom line decreased 22.2% from the year-ago figure of 81 cents due to weakness in sales. Supply-chain woes played spoilsport in the quarter.

Notably, movements in foreign currencies had a negative impact of 1 cent per share on earnings.

In 2021, the company’s adjusted earnings were $2.49 per share, increasing 20.9% from the previous year’s $2.06.Also, the bottom line surpassed the Zacks Consensus estimate of $2.47.

Revenue Details

In the quarter under review, Xylem’s revenues were $1,323 million, reflecting a decrease of 3.6% from the year-ago quarter. Organic sales in the quarter decreased 3% due to weakness in the Measurement & Control Solutions segment, offset by gains in the Water Infrastructure and Applied Water segments.

The company’s revenues surpassed the Zacks Consensus Estimate of $1,293 million.

Orders in the reported quarter increased 22% year over year to $1,584 million. Organically, orders grew 23%.

The company reports net sales under three segments — Water Infrastructure, Applied Water, and Measurement & Control Solutions. The segmental information is briefly discussed below:

Revenues for the Water Infrastructure segment were $622 million, up 1% year over year. Organic sales in the reported quarter grew 2% year over year. Businesses in the industrial and emerging markets flourished, while utilities were soft.

The Applied Water segment generated revenues of $406 million in the fourth quarter, up 2.8% year over year. Organic sales increased 3% on a year-over-year basis. Businesses in the industrial markets were healthy, partially offset by weakness in the residential market in China.

Quarterly revenues of the Measurement & Control Solutions segment were $295 million, down 18.5% year over year. Organic sales were down 18% year over year due to supply-chain issues related to chips. The smart metering business was weak in the quarter.

In 2021, the company’s revenues totaled $5.2 billion, reflecting an increase of 6.5% from the previous year. The top line surpassed the Zacks Consensus Estimate of $5.17 billion.

Margin Profile

In the reported quarter, Xylem’s adjusted earnings before interest, tax, depreciation and amortization (“EBITDA”) were $214 million, decreasing 17.1% from the year-ago quarter. Margin in the quarter decreased 260 basis points (bps) year over year to 16.2%. Cost inflation and investments adversely impacted results. This was partially offset by productivity gains and favorable pricing.

Adjusted operating income was $147 million in the quarter under review, down 22.2% year over year. The operating margin decreased 270 bps to 11.1%. Interest expenses in the reported quarter totaled $13 million, down from $21 million in the year-ago quarter.

In 2021, the company’s cost of sales increased 5.7% year over year to $3,220 million. As a percentage of revenues, it represented 62% versus 62.5% in the previous year. Selling, general and administrative expenses increased 3.1% to $1,179 million. Meanwhile, research and development expenses grew 9.1% to $204 million.

Balance Sheet and Cash Flow

Exiting the fourth quarter of 2021, Xylem had cash and cash equivalents of $1,349 million, increasing 7.5% from $1,255 million at the end of the last reported quarter. Long-term debt balance declined 0.6% sequentially to $2,440 million.

In 2021, the company repaid long-term debts of $600 million.

In 2021, it generated net cash of $538 million from operating activities, reflecting a decrease of 34.7% from the previous year. Capital expenditure was $208 million, up 13.7% year over year. Free cash flow decreased 48.5% to $330 million.

Shareholder-Friendly Policies

In 2021, Xylem paid out dividends of $203 million, reflecting an increase from $118 million distributed in 2020. Share repurchased amounted to $68 million, up 11.5% year over year.

Concurrently, the company announced that its board of directors approved the payment of a quarterly cash dividend of 30 cents per share to shareholders of record as of Feb 17, 2022. The disbursement will be made on Mar 17.

Outlook

For 2022, Xylem expects year-over-year organic revenue growth of 3-5%. Total revenues are predicted to be $5.25-$5.35 billion, suggesting a year-over-year increase of 1-3%. Adjusted earnings per share for the year are anticipated to be $2.35-$2.70, reflecting changes of (6%)-8% from the previous year.

The adjusted EBITDA margin is expected to be 16-17%.

The company predicts supply-chain restrictions (related to chip shortages) to continue impacting its performance in the first half of 2022.

Xylem Inc. Price, Consensus and EPS Surprise

 

Xylem Inc. Price, Consensus and EPS Surprise

Xylem Inc. price-consensus-eps-surprise-chart | Xylem Inc. Quote

Zacks Rank & Other Important Earnings Releases

With a market capitalization of $18.9 billion, Xylem currently carries a Zacks Rank #3 (Hold).

Three companies from the industry to soon report results are discussed below:

RBC Bearings Incorporated (ROLL - Free Report) will release fourth-quarter results on Feb 10, before market open. It presently carries a Zacks Rank #3.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The company reported better-than-expected results in three of the last four quarters and lagged estimates once. The earnings surprise was -1.11%, on average. In the past 60 days, the Zacks Consensus Estimate for RBC Bearings’ fourth-quarter earnings has been revised up 20%.

Colfax Corporation is slated to release fourth-quarter results on Feb 22, before market open. It presently carries a Zacks Rank #4 (Sell).

In the last four quarters, the company recorded better-than-expected results thrice and in-line results once. It pulled off a trailing four-quarter earnings surprise of 5.64%, on average. The Zacks Consensus Estimate for CFX’s fourth-quarter earnings has been increased by 1.8% in the past 60 days.

Barnes Group Inc. (B - Free Report) presently carries a Zacks Rank #4. The company is slated to report fourth-quarter 2021 results on Feb 18, before market open.

The company reported better-than-expected results in the last four quarters. The earnings beat for the quarters is 10.99%, on average. The Zacks Consensus Estimate for B’s fourth-quarter earnings has decreased 6.1% in the past 60 days.


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