Xylem (XYL) Earnings Meet, Revenues Beat Estimates in Q4

Zacks

Premium water-solutions provider Xylem Inc. XYL reported better-than-expected top-line results for fourth-quarter 2017 driven by improved segmental performance.

Earnings

Quarterly adjusted earnings came in at 76 cents per share, in line with the Zacks Consensus Estimate. However, the bottom line came in 12% higher than the year-ago tally.

Adjusted earnings for 2017 came in at $2.40 per share, surpassing the Zacks Consensus Estimate of $2.39. The bottom line also came ahead of the year-ago tally of $2.03 per share.

Revenues

Quarterly revenues came in at $1,277 million, beating the Zacks Consensus Estimate of $1,275 million. The top-line results improved 16.6% year over year.

Segment Details

Revenues of the Water Infrastructure segment came in at $583 million, up 10% year over year. The upside stemmed from improved dewatering applications business in North America and elevated public utility end-markets’ demand across most niche markets.

Applied Water segment generated revenues of $373 million in the reported quarter, up 6.3% year over year. The upside stemmed from robust European and U.S. industrial end-market sales. Moreover, sturdy residential end-market sales in the Asia Pacific and increased demand for commercial building applications supported growth.

Quarterly revenues of the Measurement & Control Solutions segment came in at $321 million, significantly up 50% year over year. This improvement stemmed from robust Sensus as well as legacy analytic business growth.

In 2017, revenues came in at $4,71 billion, almost in line with the Zacks Consensus Estimate of $4.70 billion. However, revenues were up 24.8% year over year.

Xylem Inc. Price, Consensus and EPS Surprise

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

Margins and Costs

Quarterly adjusted operating margin was 14%, up 400 basis points (bps) year over year.

Xylem’s cost of revenues in 2017 came in at $2,856 million, up 23.6% year over year. Gross profit margin in the year was 39.3%, expanding 60 bps year over year. Full-year selling, general and administrative expenses totaled $1,090 million, up from $915 million incurred in the year-ago period. Research and development expenses were $180 million, as against $110 million reported at the end of 2016. Adjusted organic margin in 2017 came in at 11.8%, up 100 bps year over year.

Balance Sheet and Cash Flow

Xylem exited fourth-quarter 2017 with cash and cash equivalents of $414 million compared with $308 million as of Dec 31, 2016. Long-term debt was $2,200 million, as against $2,108 million recorded at the end of 2016.

For 2017, Xylem generated cash of $686 million from operating activities compared with $497 million recorded in the prior-year period. Capital expenditure was $170 million, as against $124 million incurred in the year-ago quarter.

Outlook

Xylem anticipates to generate revenues in the range of $5.1-$5.2 billion in 2018 (estimating year-over-year growth of 8-10%). Organically top-line results are projected to be up 4-6%. Adjusted earnings per share for 2018 are estimated to lie in the band of $2.82-$2.97 per share.

Stocks to Consider

Some better-ranked stocks in the industry are listed below:

Colfax Corporation CFX sports a Zacks Rank #1 (Strong Buy). The company’s earnings per share (EPS) is projected to be up 12.3% in the next three to five years. You can see the complete list of today’s Zacks Rank #1 Rank stocks here.

Applied Industrial Technologies, Inc. AIT also flaunts a Zacks Rank #1. The company’s EPS is estimated to rise 12% over the next three to five years.

EnPro Industries NPO holds a Zacks Rank #2 (Buy). The company’s EPS is expected to be up 15.5% during the same time frame.

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