Xylem Beats on Q3 Earnings & Revs - Analyst Blog


Water solutions provider, Xylem Inc. ( XYL ) reported third-quarter 2013 results, showing year-over-year growth in both earnings and revenues. The company posted adjusted earnings of $92 million or 49 cents a share compared with $83 million or 44 cents a share in the year-ago quarter. This represented a year-over-year increase of 11% on a per share basis. Adjusted earnings for the reported quarter also surpassed the Zacks Consensus Estimate of 35 cents by 40%.

On a GAAP basis, the company reported quarterly earnings of $73 million or 39 cents per share from continuing operations compared with $72 million or 38 cents in third-quarter 2012.

Revenues :

On a constant currency basis, revenues for the reported quarter improved roughly 4% year over year to $965 million and also beat the Zacks Consensus Estimate of $921 million. The increase in revenues was a result of improved demand in emerging markets as well as better-than-expected demand in Europe. Organically, revenues for the quarter increased 1% year over year.

During the quarter, Xylem received total orders worth $955 million, which reflected an increase of 8% year over year on a constant currency basis. Major order wins in the quarter were in regions including Singapore, China, Colombia and the United Arab Emirates.

Margins/Costs :

Gross margin in the quarter was recorded at 40%, almost flat compared with the year-ago quarter. Selling, general and administrative expenses increased 11% year over year in the quarter to $256 million. Adjusted operating margin in the quarter declined roughly 170 bps year over year to 10.2%.

Segment Details :

The Water Infrastructure segment generated revenues of $619 million in the quarter, up 4% year over year. The sales increase was a result of better-than-expected demand in Europe and contributions from emerging markets. The segment's adjusted operating margin declined 10 bps year over year to 14.2%.

The Applied Water segment's revenues were recorded at $360 million compared with $350 million in the year-ago quarter. The year-over-year sales hike of 3% was a result of increased activities in the U.S. commercial and agricultural end markets, accompanied by growth in emerging markets, mainly China. The segment's adjusted operating margin declined 120 bps year over year to 11.1%.

Balance Sheet/Cash Flow :

Exiting the third quarter of 2013, Xylem's cash and cash equivalents were recorded at $394 million, compared with $360 million in the preceding quarter. Xylem carries a long-term debt of $1,199 million, flat compared with the quarter ended Jun 30, 2013.

In the nine months ended Sep 30, 2013, Xylem generated cash flow from operations of $163 million, against $230 million generated in the year-ago comparable period while capital expenditure was recorded at $91 million, compared with $81 million in the year-ago comparable period.

Outlook :

Based on the better-than-expected results for the third quarter of 2013, Xylem has revised upwards its expectations for 2013. Revenues in 2013 are expected to be $3.8 billion against $3.7 billion expected earlier. Adjusted net income is estimated at roughly $302 million, with earnings per share in the range of $1.60 to $1.65, compared with the earlier earnings per share guidance range of $1.40 to $1.50. Moreover, GAAP net income is expected to be roughly $241 million, with earnings per share projected around $1.30.

Other Stocks to Consider :

Xylem currently carries a Zacks Rank #4 (Sell). Other stocks worth considering in the industry include IDEX Corporation ( IEX ), Nordson Corporation ( NDSN ) and Parker-Hannifin Corporation ( PH ) all of which carry a Zacks Rank #2 (Buy).

IDEX CORP (IEX): Free Stock Analysis Report

NORDSON CORP (NDSN): Free Stock Analysis Report

PARKER HANNIFIN (PH): Free Stock Analysis Report

XYLEM INC (XYL): Free Stock Analysis Report

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: IEX , NDSN , PH , XYL



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