Xylem's Water Wisdom Pays Off: Q2 Beats Estimates, Outlook Upgraded

Xylem Inc. XYL shares are trading lower after it reported second-quarter FY24 results.

Revenue grew 26% Y/Y to $2.17 billion (+9% organically), beating the consensus of $2.145 billion on strong execution and demand.

By segment, Measurement & Control Solutions revenue was $482 million (+26% Y/Y), Water Infrastructure revenue was $631 million (+22% Y/Y), Applied Water revenue was $456 million (-5% Y/Y) and Water Solutions and Services was $600 million (+76% Y/Y).

Orders were up 12% Y/Y on a reported basis and declined 1% Y/Y organically to $2.09 billion.

The adjusted EBITDA margin reached 20.8%, up 170 basis points Y/Y, driven by productivity savings, higher volume, and price increases, which outweighed the effects of inflation, strategic investments, and mix changes.

Adjusted EPS was $1.09 (+14% Y/Y), beating the consensus of $1.05. 

Operating cash flow for six months ended June 30 stood at $377 million, compared to $9 million a year ago.

The company exited the year with cash and cash equivalents worth $815 million. 

Outlook: For FY24, Xylem raised the adjusted EPS outlook from $4.10-$4.25 to $4.18-$4.28 (versus the consensus of $4.21).

Also, the company revised its FY24 revenue outlook to $8.55 billion (consensus $8.56 billion), marking an increase of 16% Y/Y, with organic revenue growth expected to be 5%–6%, up from the previous range of 4%–6%.

Xylem’s President and CEO, Matthew Pine, said, “Healthy demand, combined with the team’s disciplined operational execution, delivered significant margin expansion in the quarter. Evoqua integration and synergies are also well on track.”

“We are confident in the team’s commitment to realizing our operational potential, and underlying demand in our largest markets remains resilient despite likely macro variability in the second half. Our diversified portfolio of mission-critical solutions is ideally positioned to meet global demand from intensifying water challenges.”

Investors can gain exposure to the stock via Global X Clean Water ETF AQWA and Invesco S&P Global Water Index ETF CGW.

Price Action: XYL shares are down 3% to $137.29 at the last check Tuesday.

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.