Premium water-solutions provider Xylem Inc. XYL posted in-line earnings in first-quarter 2018.
Quarterly adjusted earnings came in at 51 cents per share, in line with the Zacks Consensus Estimate. However, the bottom line came in 30.8% higher than the year-ago tally.
Quarterly revenues came in at $1,217 million, comfortably beating the Zacks Consensus Estimate of $1,179 million. The revenue figure improved 13.6% year over year.
Revenues of the Water Infrastructure segment came in at $480 million, up 14.6% year over year. The upswing stemmed from sturdy dewatering applications' demand and elevated sales from all utilities end-markets.
Applied Water segment generated revenues of $366 million in the reported quarter, up 9.9% year over year. Ongoing large industrial projects and solid commercial building applications' demand drove this improvement.
Quarterly revenues of the Measurement & Control Solutions segment came in at $371 million, up 16.3% year over year. This improvement was supported by strong analytics, as well as gas, electric and services businesses.
Xylem Inc. Price, Consensus and EPS Surprise
Margins and Costs
Xylem's cost of revenues in the quarter came in at $757 million, up 14.9% year over year. Gross profit margin shrunk 70 basis points (bps) to 37.8% in the first quarter.
Selling, general and administrative expenses totaled $296 million, up from $272 million recorded in the year-ago period. Research and development expenses were $41 million, as against $42 million reported in first-quarter 2017. Quarterly adjusted operating margin was 9.3%, up 130 bps year over year.
Balance Sheet and Cash Flow
Xylem exited the first quarter with cash and cash equivalents of $297 million compared with $414 million as of Dec 31, 2017. Long-term debt was $2,228 million, as against $2,200 million recorded at the end of 2017.
In the first three months of 2018, the company generated $63 million cash from operative activities compared with $52 million recorded in the prior-year period. Capital expenditure was $61 million, higher than $43 million incurred in the year-ago quarter.
Xylem believes elevated demand from industrial and utilities end-markets will bolster its revenues and profitability in the quarters ahead. This Zacks Rank #3 (Hold) company also expects that the growing portfolio of innovative technologies will aid in strengthening its competency, going forward. Based on the existing market conditions, Xylem reaffirmed its 2018 revenue guidance at the $5.1-$5.2 billion range (estimating year-over-year growth of 8-10%). Organically, top-line results are predicted to be up 4-6%. The company also reiterated its adjusted earnings view at $2.82-$2.97 per share, for the current year.
Stocks to Consider
Some better-ranked stocks in the same space are listed below:
Applied Industrial Technologies, Inc. AIT sports a Zacks Rank of 1 (Strong buy). The company's earnings per share (EPS) are projected to grow 12% in the next three to five years. You can see the complete list of today's Zacks #1 Rank stocks here .
Graco Inc. GGG also flaunts a Zacks Rank of 1. The company's EPS is estimated to rise 9.33%, over the next three to five years.
Tennant Company TNC is another Zacks #1 Ranked company. Its EPS is will likely be up 10% during the same time frame.
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