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Xylem Inc.’s (XYL - Free Report) first-quarter 2023 adjusted earnings (excluding 18 cents from non-recurring items) of 72 cents per share surpassed the Zacks Consensus Estimate of 62 cents. The bottom line jumped 53% year over year.
Xylem’s revenues of $1,448 million also outperformed the Zacks Consensus Estimate of $1,340.7 million and rose 13.8% year over year. Organic sales in the quarter rose 17%.
Orders in the reported quarter decreased 8% year over year. Organically, orders decreased by 5%.
Revenues in the Water Infrastructure segment were $589 million, up 11% year over year. Organic sales in the reported quarter grew 15% year over year, buoyed by effective price realization, healthy activity in the utility business and robust industrial demand in the United States and Western Europe.
The Applied Water segment generated revenues of $453 million in the first quarter, up 7% year over year. Organic sales increased 10% on a year-over-year basis. The segmental performance benefited from strong price realization and demand across the commercial building and industrial end markets, particularly in the United States and Western Europe.
Quarterly revenues at the Measurement & Control Solutions segment were $406 million, up 29% year over year. Organic sales were up 32% year over year due to strength in the water quality test and pipeline assessment applications as well as improved chip supply.
Margin Profile
In the reported quarter, Xylem’s adjusted EBITDA was $236 million, up 30.4% from the year-ago quarter’s level. The margin in the quarter improved to 16.3% compared with 14.2% in the year-ago period.
Adjusted operating income was $27 million in the quarter under review against an operating loss of $8 million. Adjusted operating margin increased 920 basis points to 6.7% in the reported quarter.
Balance Sheet and Cash Flow
Exiting the first quarter, Xylem had cash and cash equivalents of $837 million compared with $944 million at the end of December 2022. Long-term debt (net) was $1,881 million at the end of the first quarter of 2023, nearly flat from the December 2022 figure.
In the first quarter, Xylem consumed net cash of $19 million in operating activities compared with $81 million consumed at the end of December 2022. Capital expenditure was $49 million, flat year over year. Free cash flow was negative $35 million in the first quarter compared with negative $130 million in the year-ago period.
Shareholder-Friendly Policies
In the first quarter, Xylem paid out dividends worth $60 million, reflecting an increase of 9.1% year over year. The company also bought back shares worth $8 million in the same period compared with $51 million worth of shares repurchased in the year-ago period.
2023 Guidance Raised
For 2023, Xylem expects revenues to increase 8-9% on an organic and reported basis. Previously, the company expected the same to increase 4-6% organically and 3-5% on a reported basis.
Adjusted EBITDA margin is expected in the range of 17.5-18%. XYL expects adjusted earnings of $3.15-$3.35, an improvement from the previous estimate of $3.00-$3.25. The mid-point of the guided range — $3.25 — lies above the Zacks Consensus Estimate of $3.19. The raised guidance is due to the company’s expectation of continued demand strength and improved chip supply.
Zacks Rank & Key Picks
Xylem carries a Zacks Rank #3 (Hold).
Some better-ranked stocks within the broader Industrial Products sector are as follows:
Ingersoll Rand has an estimated earnings growth rate of 7.6% for the current year. The stock has rallied 9.5% in the past six months.
Allegion (ALLE - Free Report) presently carries a Zacks Rank #2 (Buy). The company delivered a trailing four-quarter earnings surprise of 12.5%, on average.
Allegion has an estimated earnings growth rate of 15.1% for the current year. The stock has gained approximately 2% in the past six months.
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Xylem (XYL) Q1 Earnings & Revenues Beat, 2023 View Raised
Xylem Inc.’s (XYL - Free Report) first-quarter 2023 adjusted earnings (excluding 18 cents from non-recurring items) of 72 cents per share surpassed the Zacks Consensus Estimate of 62 cents. The bottom line jumped 53% year over year.
Xylem’s revenues of $1,448 million also outperformed the Zacks Consensus Estimate of $1,340.7 million and rose 13.8% year over year. Organic sales in the quarter rose 17%.
Orders in the reported quarter decreased 8% year over year. Organically, orders decreased by 5%.
Xylem Inc. Price, Consensus and EPS Surprise
Xylem Inc. price-consensus-eps-surprise-chart | Xylem Inc. Quote
Segmental Details
Revenues in the Water Infrastructure segment were $589 million, up 11% year over year. Organic sales in the reported quarter grew 15% year over year, buoyed by effective price realization, healthy activity in the utility business and robust industrial demand in the United States and Western Europe.
The Applied Water segment generated revenues of $453 million in the first quarter, up 7% year over year. Organic sales increased 10% on a year-over-year basis. The segmental performance benefited from strong price realization and demand across the commercial building and industrial end markets, particularly in the United States and Western Europe.
Quarterly revenues at the Measurement & Control Solutions segment were $406 million, up 29% year over year. Organic sales were up 32% year over year due to strength in the water quality test and pipeline assessment applications as well as improved chip supply.
Margin Profile
In the reported quarter, Xylem’s adjusted EBITDA was $236 million, up 30.4% from the year-ago quarter’s level. The margin in the quarter improved to 16.3% compared with 14.2% in the year-ago period.
Adjusted operating income was $27 million in the quarter under review against an operating loss of $8 million. Adjusted operating margin increased 920 basis points to 6.7% in the reported quarter.
Balance Sheet and Cash Flow
Exiting the first quarter, Xylem had cash and cash equivalents of $837 million compared with $944 million at the end of December 2022. Long-term debt (net) was $1,881 million at the end of the first quarter of 2023, nearly flat from the December 2022 figure.
In the first quarter, Xylem consumed net cash of $19 million in operating activities compared with $81 million consumed at the end of December 2022. Capital expenditure was $49 million, flat year over year. Free cash flow was negative $35 million in the first quarter compared with negative $130 million in the year-ago period.
Shareholder-Friendly Policies
In the first quarter, Xylem paid out dividends worth $60 million, reflecting an increase of 9.1% year over year. The company also bought back shares worth $8 million in the same period compared with $51 million worth of shares repurchased in the year-ago period.
2023 Guidance Raised
For 2023, Xylem expects revenues to increase 8-9% on an organic and reported basis. Previously, the company expected the same to increase 4-6% organically and 3-5% on a reported basis.
Adjusted EBITDA margin is expected in the range of 17.5-18%. XYL expects adjusted earnings of $3.15-$3.35, an improvement from the previous estimate of $3.00-$3.25. The mid-point of the guided range — $3.25 — lies above the Zacks Consensus Estimate of $3.19. The raised guidance is due to the company’s expectation of continued demand strength and improved chip supply.
Zacks Rank & Key Picks
Xylem carries a Zacks Rank #3 (Hold).
Some better-ranked stocks within the broader Industrial Products sector are as follows:
Ingersoll Rand (IR - Free Report) presently sports a Zacks Rank #1 (Strong Buy). The company pulled off a trailing four-quarter earnings surprise of 12.6%, on average. You can see the complete list of today’s Zacks #1 Rank stocks.
Ingersoll Rand has an estimated earnings growth rate of 7.6% for the current year. The stock has rallied 9.5% in the past six months.
Allegion (ALLE - Free Report) presently carries a Zacks Rank #2 (Buy). The company delivered a trailing four-quarter earnings surprise of 12.5%, on average.
Allegion has an estimated earnings growth rate of 15.1% for the current year. The stock has gained approximately 2% in the past six months.