Core Insights - Xylem Inc. is a leading global water technology company specializing in innovative solutions for water and wastewater applications [1] - The company reported strong financial performance, with revenue and earnings per share exceeding market expectations [2][3][4] Financial Performance - For the quarter ending September 2025, Xylem reported revenue of $2.27 billion, representing a 7.8% year-over-year increase and surpassing the Zacks Consensus Estimate of $2.22 billion, resulting in a positive surprise of 1.98% [3][6] - The earnings per share (EPS) for the same quarter were reported at $1.37, an increase from $1.11 in the previous year, exceeding the consensus EPS estimate of $1.24 and delivering a surprise of 10.48% [4][6] Stock Performance - The current stock price of Xylem is $150.50, reflecting an increase of $1.10 or 0.74% [5] - Barclays has set a price target of $172 for Xylem, indicating a potential increase of approximately 14.29% from the current stock price [2][6] - The stock has fluctuated between $146.46 and $152.77 during the day, with $152.77 being the highest price over the past year [5]

Core Insights - Xylem reported revenue of $2.27 billion for the quarter ended September 2025, reflecting a year-over-year increase of 7.8% and exceeding the Zacks Consensus Estimate of $2.22 billion by 1.98% [1] - The company's EPS for the quarter was $1.37, up from $1.11 in the same quarter last year, surpassing the consensus estimate of $1.24 by 10.48% [1] Revenue Breakdown - Measurement & Control Solutions generated $522 million, exceeding the estimated $502.6 million, with a year-over-year increase of 14% [4] - Applied Water revenue was $456 million, slightly below the estimated $463.59 million, with a year-over-year increase of 2% [4] - Water Infrastructure revenue reached $656 million, surpassing the estimate of $647.39 million, representing a year-over-year increase of 5.3% [4] - Water Solutions and Services generated $634 million, exceeding the estimated $604.59 million, with a year-over-year increase of 10.1% [4] Adjusted Operating Income - Adjusted Operating Income for Water Infrastructure was $145 million, above the average estimate of $130.79 million [4] - Adjusted Operating Income for Applied Water was $89 million, slightly above the estimated $87.28 million [4] - Adjusted Operating Income for Water Solutions and Services was $127 million, exceeding the estimate of $103.37 million [4] - Corporate and other adjusted operating income was reported at -$22 million, below the estimate of -$18.8 million [4] - Measurement & Control Solutions had an adjusted operating income of $90 million, below the average estimate of $95.01 million [4] Stock Performance - Xylem's shares returned +3.8% over the past month, outperforming the Zacks S&P 500 composite's +3.6% change [3] - The stock currently holds a Zacks Rank 2 (Buy), indicating potential for outperformance in the near term [3]

Core Insights - Xylem's shares increased by 1.3% following the announcement of stronger-than-expected third-quarter results and an upward revision of its full-year revenue and earnings guidance [4] Financial Performance - Xylem reported third-quarter revenue of $2.27 billion, reflecting an 8% year-over-year increase on a reported basis [4]

Core Insights - Xylem Inc. reported third-quarter 2025 adjusted earnings of $1.37 per share, exceeding the Zacks Consensus Estimate of $1.24, representing a 23% year-over-year increase [1] - Revenues reached $2.27 billion, surpassing the consensus estimate of $2.22 billion, with a year-over-year growth of 7.8% driven by strong demand across segments [1] - Orders totaled $2.18 billion, reflecting a decrease of 0.9% year over year on a reported basis and 2% on an organic basis [1] Segment Performance - Water Infrastructure segment revenues were $656 million, up 5% year over year, with organic sales also increasing by 5%, exceeding the consensus estimate of $647 million [2] - Applied Water segment generated revenues of $456 million, a 2% year-over-year increase, with organic sales up 1%, slightly below the consensus estimate of $464 million [3] - Measurement & Control Solutions segment revenues totaled $522 million, up 14% year over year, with organic sales increasing by 11%, surpassing the consensus estimate of $503 million [3] - Water Solutions and Services segment revenues reached $634 million, a 10% year-over-year increase, with organic sales also up 10%, exceeding the consensus estimate of $605 million [4] Financial Metrics - Adjusted EBITDA was $527 million, a 17.9% increase from the previous year, with the margin improving to 23.2% from 21.2% [5] - Adjusted operating income rose to $429 million, up 22.6% year over year, with the adjusted operating margin increasing to 18.9% from 16.6% [5] Balance Sheet and Cash Flow - As of the end of the third quarter, Xylem had cash and cash equivalents of $1.19 billion, up from $1.12 billion at the end of December 2024, while long-term debt decreased to $1.91 billion from $1.98 billion [6] - In the first nine months of 2025, net cash generated from operating activities was $698 million, compared to $688 million in the prior year, with capital expenditure increasing by 12.2% to $248 million [7] Shareholder Returns - Xylem paid dividends of $293 million in the first nine months, an 11.4% increase year over year, and repurchased shares worth $14 million, down from $19 million in the previous year [8] 2025 Guidance - The company updated its 2025 revenue outlook to approximately $9.0 billion, indicating a 5-6% increase from the prior year, with adjusted EBITDA margin expected to be around 22-22.3% [10] - Adjusted earnings are forecasted to be in the range of $5.03–$5.08 per share, up from the previous expectation of $4.70 – $4.85, reflecting an increase from $4.27 per share in 2024 [11]

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Revenue and Income - Revenue for Q3 2025 reached $2,268 million, a 7.8% increase from $2,104 million in Q3 2024[9] - Net income for the nine months ended September 30, 2025, was $617 million, up 9.4% from $564 million in the same period of 2024[10] - Revenue from contracts with customers for the nine months ended September 30, 2025, was $6,406 million, representing an increase of 8% compared to $5,920 million for the same period in 2024[49] - Total revenue for the three months ended September 30, 2025, was $2,268 million, an increase from $2,104 million in the same period of 2024, representing a growth of approximately 7.8%[129] - For the nine months ended September 30, 2025, total revenue reached $6,638 million, compared to $6,306 million for the same period in 2024, marking an increase of 5.3%[131] - Net income attributable to Xylem for the nine months ended September 30, 2025, was $622 million, a 10% increase from $564 million in the prior year[180] Profitability and Margins - Gross profit for Q3 2025 was $883 million, representing a gross margin of 38.9%, compared to $784 million in Q3 2024[9] - Operating income for the nine months ended September 30, 2025, was $870 million, an increase of 17.3% from $742 million in 2024[9] - Adjusted EBITDA margin improved to 23.2%, up 200 basis points from 21.2% in the prior year[144] - Operating income for Q3 2025 was $334 million, a 19.3% increase from $280 million in Q3 2024, with an operating margin of 14.7%[176] - Adjusted EBITDA for Q3 2025 was $527 million, an 18.0% increase from $447 million in Q3 2024, with an adjusted EBITDA margin of 23.2%[178] Expenses and Costs - Research and development expenses for the nine months ended September 30, 2025, totaled $166 million, a decrease of 3.5% from $172 million in 2024[9] - Total operating expenses for the three months were $549 million, an 8.9% increase year-over-year, resulting in an expense to revenue ratio of 24.2%[150] - SG&A expenses increased by $29 million to $474 million, or 20.9% of revenue, in Q3 2025, driven by $15 million in strategic investments and $13 million in inflation[170] - Restructuring charges for Q3 2025 were $23 million, significantly higher than $4 million in Q3 2024, reflecting efforts to streamline operations[172] Acquisitions and Divestitures - The company acquired Vacom Systems, LLC for a total cash consideration of $42 million, with $37 million paid at closing and the remainder to be paid over the next 12 to 18 months[25] - The company acquired Simply Clean Air and Water, Inc. for a net cash acquisition price of $7 million[27] - The acquisition of EMX Holdings, Inc. was completed for a total fair value of consideration transferred of $106 million, paid in cash[29] - The company divested its Evoqua Magneto business for a cash selling price of $61 million, resulting in a loss of $8 million[34] - The company acquired a 25.1% equity interest in Global Omnium Idrica, S.L. for $51 million, later increasing its stake to 61.0% for $154 million[38][39] Assets and Liabilities - Total assets increased to $17,295 million as of September 30, 2025, compared to $16,493 million at the end of 2024[12] - Cash and cash equivalents at the end of Q3 2025 were $1,191 million, up from $1,121 million at the end of 2024[12] - As of September 30, 2025, total debt outstanding was $1,962 million, with long-term debt amounting to $1,913 million[84] - The balance of stockholders' equity as of September 30, 2025, is $11,219 million, reflecting an increase from previous periods due to net income and other comprehensive income[103] Shareholder Information - Basic earnings per share for Q3 2025 were $0.93, an increase from $0.89 in Q3 2024[66] - Dividends declared for the nine months ended September 30, 2024, totaled $261 million, with a consistent rate of $0.36 per share[104] - The company repurchased 0.1 million shares of common stock for $14 million during the nine months ended September 30, 2025[116] - The company has up to $182 million in shares that may still be purchased under its share repurchase program as of September 30, 2025[116] Segment Performance - Segment operating income for Water Infrastructure was $113 million for Q3 2025, compared to $96 million in Q3 2024, reflecting a year-over-year increase of 17.7%[130] - Operating income for the Water Infrastructure segment increased by 26.5% to $296 million, with an operating margin of 15.7%[182] - Measurement and Control Solutions segment reported a 9.8% increase in adjusted operating income to $270 million, with an adjusted operating margin of 17.4%[182] - Water Solutions and Services segment's adjusted operating income increased by 12.7% to $311 million, with an adjusted operating margin of 17.0%[182] Future Outlook - The company anticipates continued growth in revenue and operating margins, supported by strategic investments in new technologies and market expansion initiatives[138] - The company faces risks including supply chain disruptions, inflation, and geopolitical events that could impact future performance[139]

Financial Data and Key Metrics Changes - Revenue grew by 7% in Q3 2025, driven by strong performance in Measurement & Control Solutions and Water Solutions & Services [9][10] - EBITDA margin expanded by 200 basis points year-over-year to over 23%, with EPS growth of 23% [5][10] - Year-to-date free cash flow is down modestly, primarily due to outsourced water projects and restructuring payments [10] Business Line Data and Key Metrics Changes - Measurement & Control Solutions saw an 11% organic growth in orders, with revenue also up 11%, driven by energy metering demand [10][11] - Water Infrastructure revenue grew by 5%, with a robust EBITDA margin expansion of 400 basis points to 24.4% [13] - Applied Water reported a 1% revenue increase, with EBITDA margin expanding by 310 basis points to 21.7% [14] - Water Solutions & Services experienced a 10% revenue growth, despite an 11% decline in orders [15] Market Data and Key Metrics Changes - Orders were down 2% in Q3, primarily due to softness in China, but growth was noted in the U.S. and Western Europe [9][10] - Backlog remains strong at approximately $5 billion, indicating healthy demand across the business [10] Company Strategy and Development Direction - The company is focusing on portfolio optimization and disciplined capital deployment, as evidenced by the divestiture of the international metering business [8][11] - The ongoing simplification efforts and 80/20 implementations are driving margin improvement and resource allocation towards high-value opportunities [7][8] - The company is optimistic about long-term growth, particularly in digital water solutions and partnerships with major clients like Amazon [18][20] Management's Comments on Operating Environment and Future Outlook - Management raised full-year guidance for revenue, margin, and EPS, reflecting confidence in the team's ability to deliver commitments amid macro uncertainty [8][16] - The company anticipates continued momentum through the end of the year, supported by strong demand and backlog execution [17][20] - Management remains cautious about the impact of tariffs and FX movements but believes they can offset these through pricing actions [15][17] Other Important Information - The updated annualized tariff impact is approximately $180 million, with expectations of a slight margin dilutive effect [15] - The company is committed to maintaining a strong balance sheet, with net debt to adjusted EBITDA at 0.4 times [10] Q&A Session Summary Question: Can you continue to get margin improvement into 2026 and beyond? - Management indicated that there is likely some upside to long-term targets, with a focus on delivering 2025 commitments first [26][28] Question: How is the demand in Measurement & Control Solutions shaping up for 2026? - Demand remains healthy, with a strong backlog and expectations for continued growth in both water and energy meters [29][30] Question: What are the impacts of the government shutdown on projects? - Management noted no significant impact from the government shutdown, with previously allocated funds still expected to flow to projects [36] Question: What is the status of the 80/20 implementation? - Approximately 80% of the business is in some phase of 80/20 implementation, with ongoing divestitures expected [39][40] Question: How does the company plan to manage the challenges in China? - The company is restructuring in China, reducing the workforce by around 40% to align with market demand [79]

Financial Data and Key Metrics Changes - Revenue grew by 7% in the quarter, driven by strong performance in Measurement and Control Solutions (MCS) and Water Solutions and Services (WSS) [9][10] - EBITDA margin expanded by 200 basis points year-over-year to over 23%, with EPS growth of 23% [5][10] - Year-to-date free cash flow is down modestly, primarily due to outsourced water projects and restructuring payments, but offset by higher net income and improved net working capital [10] Business Line Data and Key Metrics Changes - Measurement and Control Solutions saw an 11% organic growth in orders, with revenue also up 11%, driven by energy metering demand [10][11] - Water Infrastructure revenue grew by 5%, with a robust EBITDA margin expansion of 400 basis points to 24.4% [13] - Applied Water reported a 1% revenue increase, marking its seventh consecutive quarter of order growth, with an EBITDA margin expansion of 310 basis points to 21.7% [14] - Water Solutions and Services experienced a 10% revenue growth, despite an 11% decline in orders [15] Market Data and Key Metrics Changes - Orders were down 2% in the quarter, primarily due to softness in China, but growth was noted in the U.S. and Western Europe [9][10] - Backlog remains robust at approximately $5 billion, with a book-to-bill ratio near one [10] - The company anticipates continued momentum in North America, with expectations for double-digit growth in water meter projects [30] Company Strategy and Development Direction - The company is focusing on portfolio optimization and disciplined capital deployment, as evidenced by the divestiture of the international metering business [8][10] - The ongoing simplification efforts and 80/20 implementations are driving margin improvement and resource allocation towards high-value opportunities [7][8] - The company raised its full-year guidance for revenue, margin, and EPS, reflecting confidence in its ability to deliver commitments amid macro uncertainties [8][16] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the long-term growth potential, particularly in digital water solutions and partnerships with major clients like Amazon [18][20] - The company is navigating macro uncertainties, including tariffs and foreign exchange movements, but remains confident in its operational execution and demand [17][20] - Management noted that while there are challenges in China, they are right-sizing the business to align with current market demand [79] Other Important Information - The updated annualized tariff impact is approximately $180 million, with expectations to offset this through pricing actions and supply chain adjustments [15] - The company is committed to maintaining a strong balance sheet, with a net debt to adjusted EBITDA ratio of 0.4x [10] Q&A Session Summary Question: What is the potential for EBITDA margin improvement in 2026 and beyond? - Management indicated that there is likely upside to long-term targets, with a focus on delivering 2025 commitments first [26][28] Question: How is the demand landscape shaping up for MCS? - Demand remains healthy, with a strong pipeline and expectations for high single-digit growth in 2026 [29][30] Question: What impact is the government shutdown having on projects? - Management noted no significant impact from the government shutdown, with previously allocated funds still expected to flow to projects [36] Question: What is the status of the 80/20 implementation? - Approximately 80% of the business is in some phase of 80/20 implementation, with ongoing efforts to simplify operations and improve margins [39][40] Question: How does the company plan to manage the challenges in China? - The company is restructuring its operations in China, reducing workforce size to align with market demand while maintaining a long-term positive outlook for the region [79][80]

Financial Data and Key Metrics Changes - Revenue grew by 7% in Q3 2025, driven by strong performance in Measurement & Control Solutions and Water Solutions & Services [9][10] - EBITDA margin expanded by 200 basis points year-over-year to over 23%, with EPS growth of 23% [5][10] - Year-to-date free cash flow is down modestly, primarily due to outsourced water projects and restructuring payments [10] Business Line Data and Key Metrics Changes - Measurement & Control Solutions saw an 11% organic growth in orders, with revenue also up 11%, driven by energy metering demand [10][11] - Water Infrastructure revenue grew by 5%, with a robust EBITDA margin expansion of 400 basis points to 24.4% [12] - Applied Water experienced a 1% revenue increase, with EBITDA margin expanding by 310 basis points to 21.7% [13] - Water Solutions & Services revenue grew by 10%, with an EBITDA margin of 26.3% [14] Market Data and Key Metrics Changes - Orders were down 2% in Q3, primarily due to softness in China, but growth was noted in the U.S. and Western Europe [9][10] - Backlog remains strong at approximately $5 billion, indicating healthy demand across the business [10] Company Strategy and Development Direction - The company is focusing on portfolio optimization and disciplined capital deployment, as evidenced by the divestiture of the international metering business [8][11] - The ongoing simplification efforts and 80/20 implementations are aimed at driving margin improvement and resource allocation [6][7][20] - The company raised its full-year guidance for revenue, margin, and EPS, reflecting confidence in its ability to deliver commitments despite macro uncertainties [8][16] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the long-term growth potential, particularly in digital water solutions and partnerships with major clients like Amazon [18][19] - The company is navigating macro uncertainties, including tariffs and FX movements, but remains confident in its operational execution and demand [17][20] Other Important Information - The updated annualized tariff impact is approximately $180 million, with expectations to offset this through pricing actions and supply chain management [15] - The company is committed to maintaining a strong balance sheet, with net debt to adjusted EBITDA at 0.4 times [10] Q&A Session Summary Question: What is the potential for EBITDA margin improvement in 2026 and beyond? - Management indicated that there is likely upside to long-term targets, with a focus on delivering 2025 commitments and ongoing transformation efforts [24][25][26] Question: How is the demand landscape shaping up for Measurement & Control Solutions? - Demand remains healthy, with a strong backlog and expectations for continued growth in both water and energy meters [27][28] Question: What impact is the government shutdown having on projects? - Management noted no significant impact from the government shutdown, with previously allocated funds still expected to flow to projects [32] Question: What is the status of the 80/20 implementation? - Approximately 80% of the business is in some phase of 80/20 implementation, with ongoing efforts to simplify operations and improve resource allocation [34][35] Question: How does the company plan to address the challenges in the Chinese market? - The company is restructuring its operations in China, reducing workforce size to align with current demand levels while maintaining a long-term positive outlook for the market [70][71]

Core Insights - Xylem reported quarterly earnings of $1.37 per share, exceeding the Zacks Consensus Estimate of $1.24 per share, and showing an increase from $1.11 per share a year ago, resulting in an earnings surprise of +10.48% [1] - The company achieved revenues of $2.27 billion for the quarter ended September 2025, surpassing the Zacks Consensus Estimate by 1.98% and up from $2.1 billion year-over-year [2] - Xylem's stock has increased by approximately 28.8% since the beginning of the year, outperforming the S&P 500's gain of 16.9% [3] Earnings Outlook - The future performance of Xylem's stock will largely depend on management's commentary during the earnings call and the company's earnings outlook [4] - Current consensus EPS estimate for the upcoming quarter is $1.31 on revenues of $2.37 billion, and for the current fiscal year, it is $4.84 on revenues of $8.96 billion [7] Industry Context - The Waste Removal Services industry, to which Xylem belongs, is currently ranked in the bottom 35% of over 250 Zacks industries, indicating potential challenges ahead [8] - Another company in the same industry, Select Water Solutions, is expected to report a significant decline in earnings, with a projected EPS of $0.05, reflecting a year-over-year change of -66.7% [9]