Xylem Inc. (XYL) is poised to benefit from growth across most of its businesses. The Measurement & Control Solutions (M&CS) segment is benefiting from robust demand for advanced technology solutions like smart metering and other applications, primarily in the United States. Growth in the transport application business, driven by the increased infrastructure projects in the United States, is boosting the Water Infrastructure segment’s performance. Strong momentum in the treatment applications business, suppo ...

Financial Performance - Xylem reported 2024 revenues of $8.6 billion, with approximately 23,000 employees globally[15]. - Total revenue for 2024 was $8,562 million, a 16.2% increase from $7,364 million in 2023[45]. - Net income for 2024 was $890 million, or $3.65 per diluted share, up 30.8% from 2023, with adjusted net income of $1,041 million, or $4.27 per diluted share, up 13.0%[203]. - Operating income increased by $357 million, or 54.8%, to $1,009 million in 2024, with an operating margin of 11.8%, up 290 basis points from 2023[201]. - Free cash flow for 2024 was $942 million, up 66% from 2023, with net cash provided by operating activities of $1,263 million, up 51%[203]. - Orders for 2024 totaled $8,730 million, an increase of 16.4% from $7,501 million in 2023, with organic orders up 4.7%[203]. - Dividends paid to shareholders increased by 9% in 2024[203]. - Total backlog at December 31, 2024, was $5,070 million, with an expectation that approximately 50% will be recognized as revenue in 2025[52]. - Gross margin improved to 37.5% in 2024, up from 36.9% in 2023, with a 60 basis point increase[213]. Revenue Segmentation - The Water Infrastructure segment generated $2,555 million in revenue, with 59% from transport applications and 41% from treatment[26]. - The Applied Water segment achieved $1,793 million in revenue, with 56% from building solutions and 44% from industrial water[26]. - The Measurement and Control Solutions segment reported $1,871 million in revenue, with 81% from smart metering and 19% from analytics[26]. - The Water Solutions and Services segment generated $2,343 million in revenue, with 58% from capital and other services and 42% from maintenance services[26]. - Water Solutions and Services revenue increased by $659 million, or 39.2%, to $2,343 million in 2024, driven by acquisitions and organic growth[208]. - Measurement and Control Solutions revenue rose by $259 million, or 16.1%, to $1,871 million, with organic growth of $255 million[207]. - Water Infrastructure revenue increased by $340 million, or 15.3%, to $2,555 million, with organic growth of $123 million[205]. - Applied Water revenue decreased by $60 million, or 3.3%, to $1,793 million, primarily due to organic declines[206]. Market and Competition - The total addressable market size of the global water industry is estimated to be approximately $750 billion[18]. - The company faces significant competition in the water industry, with key competitors including De Nora, Grundfos, and Veolia[30]. - Key competitors in the Applied Water segment include Franklin Electric Co., Inc, Grundfos, Pentair plc, and Wilo SE[34]. Sustainability and Corporate Responsibility - Xylem aims to address a 40% gap between global water supply and demand by 2030 due to rising consumption[18]. - The company focuses on sustainability leadership, aiming to decarbonize the water sector and promote resource conservation[24]. - The company has established three sustainability pillars: Decarbonizing the Water Sector, Accelerating Water Stewardship, and Advancing Water and Sanitation Hygiene (WASH) for All, with 2030 goals set for each pillar[64]. - The company aims to achieve Net Zero greenhouse gas emissions across its value chain before 2050, with updated 2030 science-based targets approved by the Science Based Target initiative[63]. - Approximately 79% of employees participated in volunteerism through the company's corporate responsibility program in 2024[84]. - The company has expanded its sustainability-linked compensation for senior leaders, aligning it with five strategically transformative 2025 Sustainability goals[80]. Operational Challenges - Significant operations and suppliers are located in China, which may be adversely affected by evolving laws, tariffs, and geopolitical changes, impacting the global supply chain and manufacturing costs[95]. - Manufacturing and operating costs are subject to fluctuations due to inflation, tariffs, and geopolitical factors, which adversely impacted cash flows and results of operations throughout 2024[96]. - The company relies on a complex network of suppliers, with potential disruptions from geopolitical conflicts, such as those in Ukraine and the Middle East, affecting logistics costs and supply availability[96]. - The competitive position depends on the ability to innovate and differentiate products, with challenges from new competitors and pricing pressures due to tariffs and emerging technologies[98]. - Supply chain disruptions, including shortages of key components like semiconductors, could materially affect the company's ability to fulfill customer orders and execute on backlog[108]. - The company is exposed to fluctuating costs for raw materials and components, which may be impacted by geopolitical factors and supply-demand dynamics[109]. - The company may incur significant costs and reputational damage from legal or environmental claims related to its business activities[115]. Cybersecurity and Compliance - Cybersecurity incidents pose risks to the company's operations and customer data, with potential adverse effects on business continuity and reputation[100]. - The company maintains a cybersecurity program but acknowledges the evolving nature of threats, which may lead to undetected intrusions[106]. - The company has a Cyber Risk Committee (CRC) that provides governance regarding cybersecurity management and receives regular updates on risks and incidents[164]. - The company has experienced cybersecurity threats in the past but does not believe they have materially affected its business or financial condition[166]. - The company is subject to increasing regulatory requirements around disclosures related to its impact on climate change, which complicates compliance efforts[150]. - The company is exposed to risks related to regulatory compliance, including anti-corruption laws and data privacy regulations[146][148]. Strategic Initiatives - The company is focused on enhancing product offerings and customer experience through innovative technologies, including artificial intelligence, to meet emerging regulations and trends[98]. - The company is engaged in a multi-year effort to transform its operating model, which may result in inefficiencies and loss of talent during transitional periods[123]. - The company is pursuing acquisitions and divestitures to enhance its portfolio, but may face challenges in integration and realizing expected returns[126]. - The acquisition of Evoqua was completed on May 24, 2023, and the company is focusing on realizing anticipated cost and revenue synergies from this integration[111]. - The company is launching initiatives in 2024 aimed at improving margins and customer centricity through business simplification and operational productivity measures[122]. Employee Engagement and Culture - The company is committed to a high-impact culture that fosters innovation and accountability among its employees[69]. - The company conducts regular employee surveys to gauge engagement and identify areas for improvement[71]. - The company recognizes the importance of labor organizations and respects employees' rights to join or refrain from joining such organizations[85]. - The company is focused on attracting and retaining highly qualified talent, which is critical for executing its strategy and driving innovation[120].

Company Overview - Permascand, based in Sweden and owned by Altor, has merged with Magneto Special Anodes to create a global leader in catalytic coatings and electrodes for premium segment customers [1] - Magneto Special Anodes was previously a brand of Xylem Inc., with production facilities located in the Netherlands and China [1] Technological Leadership - Both companies possess technological leadership in electrochemical catalytic coatings and electrodes, serving complementary customer segments [2] - The ambition is to grow within existing segments and leverage technology expertise into new segments, particularly in green hydrogen, which is vital for the green transition of industry [2] Leadership Changes - David Ekberg has been appointed as CEO of the newly formed company, bringing experience from Stora Enso, Climeon, and Ericsson [3] - Ekberg expressed that the merger marks a new chapter for both companies and highlights the potential to address critical needs for the green transition [4] Strategic Vision - Under Ekberg's leadership, the company aims to embark on a growth journey, serving both existing and new customers with leading products and solutions [5] - Annica Bresky, Chair of the Board, emphasized Ekberg's entrepreneurial mindset and global experience in driving growth and innovation [5] Transaction Details - The transaction has been completed, and both entities will continue to operate under their existing names in the short term [6]

Financial Data and Key Metrics Changes - For the full year 2024, revenue grew by 6%, EBITDA margins expanded by 170 basis points, and EPS increased by double digits [11][12][19] - The fourth quarter saw a revenue growth of 7%, with a quarterly EBITDA margin of 21%, up 140 basis points from the prior year [19][20] - Year-to-date free cash flow increased by 29% from the prior year, with a conversion rate of 116% [21] Business Line Data and Key Metrics Changes - Measurement and Control Solutions (MCS) experienced a 6% increase in orders and revenue, with an EBITDA margin of 17.1%, down 120 basis points year-over-year [22][23] - Water Infrastructure saw orders up by 10% and revenue increased by 8%, with an EBITDA margin up 360 basis points [24][25] - Applied Water had orders up by 5%, with revenue essentially flat year-over-year, and an EBITDA margin increase of 60 basis points [25] - Water Solutions and Services (WSS) reported an 8% increase in orders and an 11% revenue growth, with an EBITDA margin of 22.8%, up 10 basis points [26] Market Data and Key Metrics Changes - The ending backlog was $5.1 billion, essentially flat from the prior year, with a book-to-bill ratio near one for the quarter [18] - The company anticipates healthy demand overall through 2025, despite some uncertainty in specific end markets and regions [12][30] Company Strategy and Development Direction - The company is undergoing a transformation to simplify its operating model, moving from a matrix structure to a single access structure [13][15] - Recent capital deployment actions include increasing stake in Idrica and acquiring tuck-in companies to enhance offerings [14][15] - The company aims to optimize its portfolio for growth and profitability while focusing on sustainability and addressing water-related disasters [45][46] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the demand for 2025, expecting organic revenue growth across segments, with MCS projected to grow in high single digits [29][30] - The company is prepared for potential tariff impacts and is actively managing its supply chain to mitigate risks [40][41][120] - Management highlighted the importance of maintaining strong relationships with government entities regarding water infrastructure funding [128][129] Other Important Information - The company expects to incur total pretax charges of approximately $95 million to $115 million due to restructuring, with anticipated net benefits of about $130 million over the next two years [55][56] - The restructuring plan will impact less than 10% of the workforce, primarily in SG&A [57] Q&A Session Summary Question: Can you provide more details on the restructuring announcement? - Management confirmed that the restructuring plan is consistent with previous discussions and aims to reduce complexity while ensuring a smooth transition for affected employees [50][51] Question: What are the expectations regarding PFAS regulations? - Management indicated that there are no anticipated impacts from PFAS regulations on municipal drinking water, and they remain optimistic about the regulatory environment [60][62] Question: How do you view the margin progression for MCS? - Management expects sequential improvement in MCS margins throughout the year, with a focus on normalizing the mix of products sold [66][71] Question: What is the outlook for Applied Water? - Management anticipates a return to growth in Applied Water, driven by larger project wins and recovery in developed markets, despite some challenges in emerging markets [90][92] Question: How is the company approaching M&A and capital deployment? - Management emphasized a disciplined approach to capital deployment, focusing on core business optimization and accretive M&A opportunities [96][99]

Xylem Inc.’s (XYL) fourth-quarter 2024 adjusted earnings of $1.18 per share beat the Zacks Consensus Estimate of $1.12. The bottom line increased 19% year over year.XYL’s revenues of $2.30 billion beat the consensus estimate of $2.18 billion. The top line increased 7% year over year, driven by resilient demand reflected by solid orders growth across all segments. Organic revenues rose 7%.Orders of $2.2 billion increased 7% year over year on a reported and organic basis.For 2024, Xylem reported net revenues ...

Core Insights - Xylem reported revenue of $2.26 billion for the quarter ended December 2024, reflecting a 6.5% increase year-over-year and a surprise of +3.37% over the Zacks Consensus Estimate of $2.18 billion [1] - The company's EPS was $1.18, up from $0.99 in the same quarter last year, surpassing the consensus EPS estimate of $1.12 by +5.36% [1] Revenue Performance - Measurement & Control Solutions revenue was $469 million, slightly above the estimated $466.55 million, with a year-over-year change of +0.2% [4] - Applied Water revenue reached $454 million, exceeding the estimate of $451.83 million, but showed a year-over-year decline of -0.7% [4] - Water Infrastructure revenue was $727 million, surpassing the estimated $707.55 million, but down -16.5% compared to the previous year [4] - Water Solutions and Services revenue was $606 million, significantly above the estimated $558.28 million, marking an impressive year-over-year increase of +88.2% [4] Adjusted Operating Income - Adjusted Operating Income for Water Infrastructure was $155 million, exceeding the estimate of $135.54 million [4] - Adjusted Operating Income for Applied Water was $77 million, slightly above the average estimate of $74.90 million [4] - Adjusted Operating Income for Water Solutions and Services was $92 million, surpassing the estimate of $85.56 million [4] - Corporate and other Adjusted Operating Income was -$10 million, better than the estimate of -$16.90 million [4] - Measurement & Control Solutions Adjusted Operating Income was $63 million, below the average estimate of $84.38 million [4] Stock Performance - Xylem's shares have returned +5.1% over the past month, outperforming the Zacks S&P 500 composite's +1% change [3] - The stock currently holds a Zacks Rank 4 (Sell), indicating potential underperformance relative to the broader market in the near term [3]

2024 Fourth Quarter Results and Earnings Forward-Looking Statements This presentation contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Generally, the words "anticipate," "estimate," "expect," "project," "intend," "plan," "contemplate," "predict," "forecast," "likely," "believe," "target," "will," "could," "would," "should," "potential," "may" and similar expressions or their ...

Core Insights - Xylem reported quarterly earnings of $1.18 per share, exceeding the Zacks Consensus Estimate of $1.12 per share, and showing an increase from $0.99 per share a year ago, resulting in an earnings surprise of 5.36% [1] - The company generated revenues of $2.26 billion for the quarter ended December 2024, surpassing the Zacks Consensus Estimate by 3.37% and up from $2.12 billion year-over-year [2] - Xylem's stock has increased approximately 5.8% since the beginning of the year, outperforming the S&P 500's gain of 1.9% [3] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $1 on revenues of $2.09 billion, and for the current fiscal year, it is $4.66 on revenues of $8.79 billion [7] - The estimate revisions trend for Xylem is currently unfavorable, leading to a Zacks Rank 4 (Sell), indicating expected underperformance in the near future [6] Industry Context - The Waste Removal Services industry, to which Xylem belongs, is currently ranked in the bottom 27% of over 250 Zacks industries, suggesting potential challenges ahead [8] - Another company in the same industry, Waste Connections, is expected to report quarterly earnings of $1.20 per share, reflecting a year-over-year increase of 8.1% [9]

Financial Performance - Total revenue for Q4 2024 was $2.3 billion, exceeding prior guidance, with a year-over-year increase of 7%[1][3] - Net income for Q4 2024 was $326 million, or $1.34 per share, with a net income margin increase of 190 basis points to 14.5%[2][3] - Adjusted EBITDA margin for Q4 2024 was 21.0%, reflecting a year-over-year increase of 140 basis points[3] - Full-year 2024 revenue reached $8.6 billion, up 16% on a reported basis and 6% organically[3] - Adjusted net income for Q4 2024 was $287 million, or $1.18 per share, up 19%[2][3] - Full-year 2024 earnings per share were $3.65, up 31% compared to the previous year[3] - Net income for 2024 increased to $890 million, up 46% from $609 million in 2023[16] - Operating cash flow for 2024 was $1,263 million, a significant increase from $837 million in 2023[16] - Free cash flow for 2024 was calculated as net cash from operating activities minus capital expenditures, resulting in $942 million[24] - Total operating income for the year 2024 was $1,009 million, significantly higher than $652 million in 2023[33] - The adjusted operating margin for Total Xylem for the year 2024 was 16.0%, compared to 14.6% in 2023[36] Revenue Forecast - The company forecasts full-year 2025 revenue of approximately $8.6 to $8.7 billion, representing a growth of 0 to 2% on a reported basis[5] - Full-year 2025 adjusted EBITDA margin is expected to be approximately 21.3 to 21.8%, an increase of 70 to 120 basis points from 2024[5] - The company expects to maintain a positive outlook for 2025, projecting continued revenue growth driven by demand in water infrastructure and solutions[29] Dividends and Shareholder Returns - The Board of Directors declared a first-quarter dividend of $0.40 per share, an increase of 11%[4] - Dividends paid increased to $350 million in 2024, compared to $299 million in 2023, reflecting a commitment to returning value to shareholders[16] Segment Performance - Xylem Inc. reported a revenue of $8,730 million for 2024, representing a 16% increase compared to $7,501 million in 2023[29] - The Water Infrastructure segment achieved $2,727 million in revenue, up 18% from $2,313 million in the previous year[29] - The Water Solutions and Services segment saw a significant revenue increase of 43%, reaching $2,507 million compared to $1,748 million in 2023[29] - The Applied Water segment experienced a slight decline in revenue, down 3% to $1,793 million from $1,853 million[31] - The Measurement and Control Solutions segment reported a revenue increase of 16%, totaling $1,871 million compared to $1,612 million in 2023[31] - Water Infrastructure segment reported Q4 2024 revenue of $727 million, a 7.9% increase from $674 million in Q4 2023[33] Orders and Growth Indicators - The company reported orders of $2.2 billion in Q4 2024, up 7% on both reported and organic bases[3] - The company indicated a strong order growth with a book-to-bill ratio of 1.02 for the year[29] Operational Efficiency - Adjusted EBITDA margin is a key performance indicator, reflecting the company's operational efficiency[22] - Organic revenue growth is a focus, excluding impacts from foreign currency and acquisitions, to better assess underlying performance[19] Cash Flow and Investments - Capital expenditures rose to $321 million in 2024, compared to $271 million in 2023, reflecting ongoing investment in growth[16] - The company reported a net cash decrease in investing activities of $482 million in 2024, down from $628 million in 2023[16] - The effect of exchange rate changes on cash was a negative $53 million in 2024, contrasting with a positive impact of $23 million in 2023[16] Special Charges and Costs - Restructuring & realignment costs for Q1 2024 totaled $36 million, up from $24 million in Q1 2023, while year-to-date costs were $91 million compared to $106 million in 2023[37] - Special charges in Q1 2024 included $15 million for acquisition & integration costs and $6 million for intangible asset impairment, compared to $21 million in 2023[37] - Year-to-date purchase accounting intangible amortization increased to $216 million in 2024 from $176 million in 2023[37] - Special charges for the year-to-date 2024 amounted to $50 million, significantly lower than $134 million in 2023[37] Quarterly Performance - For the quarter ended December 31, 2024, Xylem Inc. achieved a revenue of $2,256 million, a 7% increase from $2,118 million in the same quarter of 2023[31] - Total revenue for Q1 2024 reached $2,033 million, compared to $1,448 million in Q1 2023, reflecting a year-over-year growth of approximately 40.4%[39] - Adjusted operating income for Total Xylem in Q4 2024 was $377 million, compared to $313 million in Q4 2023, reflecting a 20.5% increase[34] - The operating margin for Total Xylem improved to 16.7% in Q4 2024, up from 14.8% in Q4 2023[36] - Adjusted diluted EPS for Q4 2024 was $1.18, an increase from $0.99 in Q4 2023[36] - The company reported a net income of $287 million in Q4 2024, compared to $239 million in Q4 2023[36]

Company Overview - Xylem Inc is a global leader in water technology, spun out from ITT Inc in 2011 [1] - Originally a pure-play water pump manufacturer, the company has expanded its operations both upstream and downstream [1] Analyst Background - The analyst has a background in equity and real estate markets, specializing in identifying long-only opportunities with safe and growing dividends [1] - The analyst has experience managing over $100 million in commercial real estate investments and has a background in economics and applied mathematics [1] Disclosure - The analyst has no stock, option, or derivative positions in any of the mentioned companies and no plans to initiate such positions within the next 72 hours [1] - The article expresses the analyst's own opinions and is not receiving compensation other than from Seeking Alpha [1]