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Xylem (XYL) Q2 Earnings & Revenues Beat, View Encouraging

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Premium water-solutions provider Xylem Inc. (XYL - Free Report) reported better-than-expected results for second-quarter 2018.

Earnings/Revenues

Quarterly adjusted earnings of 73 cents per share outpaced the Zacks Consensus Estimate of 71 cents. The bottom line also came in 23.7% higher than the year-ago tally.

Quarterly revenues came in at $1,317 million, beating the Zacks Consensus Estimate of $1,269 million. Also, the top-line results improved 13.1% year over year.

Segment Details

Revenues in the Water Infrastructure segment came in at $546 million, up 13.3% year over year. This upside stemmed from improved utilities and industrial end-market demand.

Applied Water segment generated revenues of $388 million in the June-end quarter, up 7.5% year over year. This upswing stemmed from robust industrial and commercial end-market business.

Quarterly revenues of the Measurement & Control Solutions segment came in at $383 million, significantly up 19.3% year over year. This improvement stemmed from robust Sensus, as well as legacy analytic business growth.

Xylem Inc. Price, Consensus and EPS Surprise

 

Xylem Inc. Price, Consensus and EPS Surprise | Xylem Inc. Quote

Margins/Costs

Xylem’s cost of revenues in the second quarter was $798 million, up 12.9% year over year. Gross profit margin was 39.4%, up 10 basis points (bps) year over year.

Selling, general and administrative expenses totaled $293 million, up from $270 million incurred in the year-ago period. Research and development expenses were $50 million, as against $44 million incurred in the year-ago quarter.Adjusted operating margin in the quarter under review was 13%, up 120 bps year over year.

Balance Sheet and Cash Flow

Xylem exited the second quarter with cash and cash equivalents of $321 million compared with $414 million as of Dec 31, 2017. Long-term debt was $2,179 million, as against $2,200 million recorded at the end of 2017.

In the first six months of 2018, Xylem generated $201 million cash from operating activities, higher than $151 million cash generated in the comparable period last year. Capital expenditure was $111 million, as against $77 million incurred in the year-earlier period.

Outlook

Xylem stated that its pricing actions and stronger productivity will help mute the impact of 

prevailing headwinds owing to higher tariffs and material cost inflation.

The company currently anticipates generating revenues of roughly $5.2 billion in 2018, estimating organic revenue growth of 6-7%. In addition, the adjusted earnings view for the current year is pegged at at $2.85-$2.95 per share.

Stocks to Consider

Xylem currently carries a Zacks Rank #4 (Sell). Some better-ranked stocks in the same space are listed below:

Altra Industrial Motion Corp. (AIMC - Free Report) currently sports a Zacks Rank #1 (Strong Buy). The company pulled off an average positive earnings surprise of 4.01% over the last four quarters. You can see the complete list of today’s Zacks Rank #1 Rank stocks here.

Chart Industries, Inc. (GTLS - Free Report) also flaunts a Zacks Rank of 1. The company recorded an average positive earnings surprise of 29.36% over the trailing four quarters.

Barnes Group, Inc. (B - Free Report) holds a Zacks Rank #2 (Buy). The company came up with an average positive earnings surprise of 6.88% during the same time frame.

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