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Xylem Inc.’s (XYL - Free Report) 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.
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:
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Flowserve Corporation (FLS - Free Report) 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.
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Xylem (XYL) Q4 Earnings & Revenues Beat, Dividend Hiked
Xylem Inc.’s (XYL - Free Report) 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 - Free Report) 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 - Free Report) 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 - Free Report) 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.