Xylem Raises FY23 Outlook On Solid Q2 Earnings Beat

Xylem Inc.  XYL reported Q2 revenue growth of 26.2% Y/Y to $1.72 billion (+15% organically), beating the analyst consensus of $1.67 billion.

Q2 adjusted EPS of $0.98 beat the street view of $0.85.

Orders were up 10% on a reported basis and down 2% organically, while backlog grew to $5.3 billion, up 7% organically.

Gross profit rose 25.2% year over year to $651 million.

Net income margin decreased 290 basis points to 5.3 percent, owing to higher acquisition and integration costs related to the Evoqua transaction, higher purchase accounting intangible amortization, and higher restructuring and realignment costs.

Also Read: Xylem Closes Evoqua Water Buyout, Boosting Position In Water Treatment Solutions

Excluding Evoqua results, the adjusted EBITDA margin was 18.6%, up 200 basis points over the prior year. 

Strong price realization more than offset inflation, coupled with productivity savings and higher volume, drove the margin expansion.

The company exited the quarter with cash and equivalents worth $708 million. 

Outlook Raised

Xylem now expects full-year 2023 revenue of approximately $7.20 billion, up 9%-10% on an organic basis (prior view: up 8%-9% on an organic basis). The street view stands at $7.02 billion.

The company expects adjusted EPS of $3.50-$3.70 (prior view: $3.15-$3.35). The street view stands at $3.18.

Price Action: XYL shares are trading higher by 2.11% to $114.29 on the last check Wednesday.