Xylem Announces Leadership Succession; Maintaining Standard Capital Allocation Rating

Equity Analyst

Krzysztof Smalec

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Applied Water

Measurement & Control Solutions

Integrated Solutions and Services

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Xylem is one of the leading water technology companies in the world. Its extensive portfolio spans a wide range of equipment and solutions for the water industry, including the transport, treatment, testing, and efficient use of water for public utilities as well as industrial, commercial, and residential customers. Xylem operates three business segments: water infrastructure, applied water, and measurement and control solutions.

After several strategic acquisitions, including Sensus in 2016, we believe Xylem can offer utilities a comprehensive portfolio of solutions aimed at addressing the problem of nonrevenue water, including pumps, sensors, smart meters, and leak detection, as well as a data management platform to monitor and analyze data from all these products. We believe the ability to cross-sell these products and link them together will make Xylem a one-stop shop for utilities.

We think Xylem is poised to benefit from long-term trends, including global population growth, water scarcity in developing countries, and the need to replace aging water infrastructure in developed countries. Furthermore, we think the company will continue to capitalize on cross-selling opportunities, as Xylem has traditionally held a strong position in the wastewater and outdoor water sectors, while Sensus has established a strong presence on the clean water side.

We also believe the firm has room for further margin expansion. Management is implementing multiple initiatives aimed at expanding adjusted EBITDA margins by 50-75 basis points per year, including business simplification, global procurement, and lean initiatives. We expect margin expansion to be driven by operating leverage and the mix shift to digital solutions as well.

Business Strategy & Outlook

We think Xylem has carved a narrow moat primarily due to customer switching costs and secondarily due to intangible assets. Xylem’s large installed base of equipment generates recurring revenue driven by aftermarket service and replacement parts in the water infrastructure segment, replacement parts in the applied water segment, and long-term contracts (up to 15-20 years) in the measurement and control solutions segment. The company’s moat is bolstered by intangible assets, including an extensive patent portfolio, reputable brands, and strong dealer relationships. Thanks to its broad portfolio of solutions, Xylem can help utilities address multiple problems of nonrevenue water (revenue lost by water utilities due to physical leaks, unbilled consumption, meter inaccuracy, and so on).

We believe water infrastructure’s narrow moat rests on customer switching costs and intangible assets. Xylem is the leader in the fragmented wastewater transport space, and its Flygt brand has a strong reputation for reliability and efficiency. Having a reputation for reliability is imperative in this segment, as the equipment often performs a mission-critical function (for instance, pumps for wastewater treatment facilities). Thus, while pricing is an important consideration, customers are relatively less likely to aggressively pursue cost savings by switching to a cheaper alternative as the cost of unscheduled downtime or product failures could far exceed potential cost savings. For public utilities, public safety considerations are also important, because equipment failures could even create an environmental hazard (for example, spills or sewer overflow). Furthermore, since water utilities tend to be risk-averse, they do not typically replace an individual pump that is part of a pumping network with an alternative one that uses different technology. Because of high switching costs, most customers are loyal, which makes sales relatively resilient.

The applied water segment benefits from similar industry dynamics as water infrastructure, as it also manufactures equipment that performs vital functions. This leads to relatively high switching costs, as any plant downtime can be extremely costly for industrial and commercial customers. A reputation for quality and reliability is important, and Xylem benefits from a strong portfolio of brands and a large installed base, which leads to a relatively sticky business as customers tend to replace equipment with similar products from the same company. Nevertheless, we think that the moat around applied water might be narrower than the moat around water infrastructure. The latter sells most products directly to customers, whereas the former sells most products through distributors. We think this creates an additional layer of distance between Xylem and the ultimate consumer, which might result in a lower degree of loyalty and make the applied water segment relatively more vulnerable to competition in the long run. That said, the segment currently enjoys a strong market position, solid operating margins, healthy aftermarket revenue, and long-standing relationships with major distributors. As such, we think the segment warrants a narrow moat and is more likely than not to outearn its cost of capital throughout the next decade. 

We believe measurement and control solutions has established a narrow moat attributable primarily to switching costs. Customers in this segment often sign long-term contracts (up to 15-20 years), which consist of equipment purchases in the first few years, followed by a subscription fee during the latter part of the contract, which generates a stream of recurring revenue. Xylem’s moat around measurement and control solutions is supported by intangible assets. For example, its Sensus brand is a leader in smart meters, which help avoid costly disruptions, minimize revenue loss due to inaccurate measurements, and significantly reduce labor costs by allowing customers to monitor water quality remotely.

Lastly, we think that Evoqua, which provides a broad range of water and wastewater treatment solutions, has established a narrow moat based on customer switching costs and intangible assets. Evoqua’s integrated solutions and services business offers outsourced water service contracts, including short-term service deionization contracts (averaging 1-2 years) and longer-term build-own-operate contracts (averaging 8-10 years). We believe that a key element of Evoqua’s moat is its unparalleled network of service professionals, which allows the firm to reach customers within two hours in the United States. Evoqua’s intangible assets include its portfolio of technologies for the removal and destruction of contaminants. Furthermore, Evoqua’s Water One digitally connected service platform has remote monitoring capabilities, which enable the company to offer enhanced reliability and lower costs by optimizing routine service calls. The digitally enabled mix currently accounts for roughly 20% of integrated solutions and services revenue, and management aims to grow it to 40% within the next 3-5 years. Since there is an over 1,000-basis-point margin spread between outsourced water offerings and capital sales, we expect the growth in digitally connected revenue to not only reinforce Evoqua’s moat but also drive meaningful margin expansion.

Narrow

Economic Moat

Xylem

Xylem, Inc. engages in the design, manufacture, and application of engineered technologies for the water industry. It operates through the following business segments: Water Infrastructure, Applied Water, and Measurement and Control Solutions. The Water Infrastructure segment focuses on the transportation, treatment and testing of water. The Applied Water segment encompasses the uses of water and focuses on the commercial, residential, and industrial end markets. The Measurement and Control Solutions segment focuses on developing technology solutions that enable intelligent use and conservation of critical water and energy resources as well as analytical instrumentation used in the testing of water. The company was founded in 2011 and is headquartered in Washington, DC.

Earnings data Q3 2023

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NEW YORK , Sept. 27, 2023 /PRNewswire/ --  WHY: Rosen Law Firm, a global investor rights law firm, announces an investigation of potential securities claims on behalf of shareholders of Xylem Inc. (NYSE: XYL) resulting from allegations that Xylem may have issued materially misleading business information to the investing public.

XYL EQUITY ALERT: ROSEN, TOP RANKED INVESTOR COUNSEL, Encourages Xylem Inc. Investors with Losses to Inquire About Securities Class Action Investigation - XYL

Evoqua Water Technologies

LOS ANGELES, CA / ACCESSWIRE / September 27, 2023 / The Schall Law Firm, a national shareholder rights litigation firm, announces that it is investigating claims on behalf of investors of Xylem Inc. ("Xylem" or "the Company") (NYSE:XYL) who were Evoqua (NYSE:AQUA) shareholders who received shares of Xylem, Inc. through the 2023 merger for violations of the securities laws. The investigation focuses on whether the Company issued false and/or misleading statements and/or failed to disclose information pertinent to investors.

INVESTOR ACTION NOTICE: The Schall Law Firm Announces it is Investigating Claims Xylem Inc. and Encourages Investors with Losses to Contact the Firm

NEW YORK--(BUSINESS WIRE)--WHY: Rosen Law Firm, a global investor rights law firm, announces an investigation of potential securities claims on behalf of shareholders of Xylem Inc. (NYSE: XYL) resulting from allegations that Xylem may have issued materially misleading business information to the investing public. SO WHAT: If you purchased Xylem securities you may be entitled to compensation without payment of any out of pocket fees or costs through a contingency fee arrangement. The Rosen Law F.

XYL INVESTOR NEWS: ROSEN, A LEADING LAW FIRM, Encourages Xylem Inc. Investors With Losses to Inquire About Securities Class Action Investigation – XYL

WASHINGTON--(BUSINESS WIRE)-- #LetsSolveWater--Xylem Inc. (NYSE: XYL), a leading global water technology company dedicated to solving the world's most challenging water issues, will release its third quarter 2023 results at 6:55 a.m. (ET) on Tuesday, October 31, 2023. At 9:00 a.m. (ET), Xylem's senior management team will host a conference call with investors. The call can be accessed by calling +1 (800) 225-9448 (US) or +1 (203) 518-9783 (INTL) (ID # XYLQ323) or by visiting Investors Events | Xylem US. A replay.

Xylem to Release Third Quarter 2023 Financial Results on October 31, 2023

LOS ANGELES, CA / ACCESSWIRE / September 25, 2023 / The Schall Law Firm, a national shareholder rights litigation firm, announces that it is investigating claims on behalf of investors of Xylem Inc. ("Xylem" or "the Company") (NYSE:XYL) who were Evoqua (AQUA) shareholders who received shares of Xylem, Inc. through the 2023 merger for violations of the securities laws. The investigation focuses on whether the Company issued false and/or misleading statements and/or failed to disclose information pertinent to investors.

INVESTIGATION ALERT: The Schall Law Firm Announces it is Investigating Claims Xylem Inc. and Encourages Investors with Losses to Contact the Firm

LOS ANGELES, CA / ACCESSWIRE / September 22, 2023 / The Schall Law Firm, a national shareholder rights litigation firm, announces that it is investigating claims on behalf of investors of Xylem Inc. ("Xylem" or "the Company") (NYSE:XYL) who were Evoqua (NYSE:AQUA) shareholders who received shares of Xylem, Inc. through the 2023 merger for violations of the securities laws. The investigation focuses on whether the Company issued false and/or misleading statements and/or failed to disclose information pertinent to investors.

INVESTOR ACTION ALERT: The Schall Law Firm Announces it is Investigating Claims Xylem Inc. and Encourages Investors with Losses to Contact the Firm

Xylem (XYL) collaborates with Lorentz to accelerate the availability of solar-powered pumping systems across the globe.

Xylem (XYL) Joins Lorentz to Boost Solar-Powered Pump Offerings

WASHINGTON--(BUSINESS WIRE)-- #LetsSolveWater--Xylem and LORENTZ will enter into a distribution agreement to expand the availability of solar-powered pumping systems globally.

Xylem, Lorentz Partner to Accelerate Deployment of Solar-Powered Pumping Solutions

Strength across the utilities and industrial water applications end markets and benefits from the Evoqua acquisition bode well for Xylem (XYL). Shareholder-friendly policies raise the stock's appeal.

Here's Why Hold Strategy is Apt for Xylem (XYL) Stock Now

LOS ANGELES, CA / ACCESSWIRE / September 18, 2023 / The Schall Law Firm, a national shareholder rights litigation firm, announces that it is investigating claims on behalf of investors of Xylem Inc. ("Xylem" or "the Company") (NYSE:XYL) who were Evoqua (NYSE: AQUA) shareholders who received shares of Xylem, Inc. through the 2023 merger for violations of the securities laws. The investigation focuses on whether the Company issued false and/or misleading statements and/or failed to disclose information pertinent to investors.

SHAREHOLDER ACTION ALERT: The Schall Law Firm Announces it is Investigating Claims Xylem Inc. and Encourages Investors with Losses to Contact the Firm

LOS ANGELES, CA / ACCESSWIRE / September 13, 2023 / The Schall Law Firm, a national shareholder rights litigation firm, announces that it is investigating claims on behalf of investors of Xylem Inc. ("Xylem" or "the Company") (NYSE:XYL) who were Evoqua (NYSE:AQUA) shareholders who received shares of Xylem, Inc. through the 2023 merger for violations of the securities laws. The investigation focuses on whether the Company issued false and/or misleading statements and/or failed to disclose information pertinent to investors.

ONGOING INVESTIGATION ALERT: The Schall Law Firm Announces it is Investigating Claims Xylem Inc. and Encourages Investors with Losses to Contact the Firm

WASHINGTON--(BUSINESS WIRE)-- #LetsSolveWater--Xylem Inc. (NYSE: XYL), a leading global water technology company dedicated to solving the world's most challenging water issues, today announced that after a distinguished decade leading Xylem, President and Chief Executive Officer Patrick Decker has announced his plans to retire as CEO at the end of 2023. In accordance with the Company's long-term succession planning process, Decker will be succeeded by Matthew Pine, Xylem's Chief Operating Officer, effective Janu.

Xylem Announces CEO Succession Aligned with Growth Strategy and Next Steps in Value Creation

Xylem (XYL) reported earnings 30 days ago. What's next for the stock?

Why Is Xylem (XYL) Down 4.5% Since Last Earnings Report?

NEW YORK , Aug. 28, 2023 /PRNewswire/ -- Pomerantz LLP is investigating claims on behalf of investors of Xylem Inc. ("Xylem" or the "Company") (NYSE: XYL). Such investors are advised to contact Robert S.

SHAREHOLDER ALERT: Pomerantz Law Firm Investigates Claims On Behalf of Investors of Xylem Inc. - XYL

WASHINGTON--(BUSINESS WIRE)-- #LetsSolveWater--Xylem Announces Participation at Upcoming Investor Conferences.

Xylem Announces Participation at Upcoming Investor Conferences

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Xylem is a well-positioned water technology company with solid financial performance. The company's profitability metrics have been stable, with positive free cash flow and consistent dividend growth. Xylem's recent acquisitions and partnerships position it for continued growth in the promising water technology industry.

Xylem: Solid Buy For Long-Term Investors

Xylem has good growth prospects driven by backlog, end market demand, government stimulus, aging water infrastructure, AMI technology, and revenue synergy from the Evoqua acquisition. The company reported strong revenue growth in Q2 2023, driven by organic growth and benefits from the Evoqua acquisition. Xylem's margins are expected to improve due to volume leverage, easing inflationary headwinds, cost synergies from the Evoqua acquisition, and productivity initiatives.

Xylem Is A Good Buy At The Current Levels

WASHINGTON--(BUSINESS WIRE)-- #LetsSolveWater--The Board of Directors of Xylem Inc. (NYSE: XYL), has declared a third quarter dividend of $0.33 per share payable on September 28, 2023, to shareholders of record as of August 31, 2023. About Xylem Xylem (XYL) is a leading global water technology company committed to solving the world's critical water, wastewater, and water-related challenges through technology, innovation, and expertise. Our more than 22,000 diverse employees delivered combined pro forma revenue o.

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Xylem, Inc. (NYSE:XYL ) Q2 2023 Earnings Conference Call August 2, 2023 9:00 AM ET Company Participants Andrea van der Berg - VP, IR Patrick Decker - President, CEO & Director Sandra Rowland - SVP & CFO Matthew Pine - COO Conference Call Participants Deane Dray - RBC Capital Markets Michael Halloran - Robert W. Baird & Co. Joseph Giordano - TD Cowen Andrew Kaplowitz - Citigroup Saree Boroditsky - Jefferies Nathan Jones - Stifel, Nicolaus & Company Brian Lee - Goldman Sachs Group Operator Welcome to Xylem's Second Quarter 2023 Earnings Conference Call.

Xylem, Inc. (XYL) Q2 2023 Earnings Call Transcript

Xylem's (XYL) Q2 results benefit from strong commercial and operational execution and contribution from the Evoqua acquisition. Following strong performance, the company raises its 2023 guidance.

Xylem (XYL) Q2 Earnings & Revenues Top Estimates, '23 View Up

Although the revenue and EPS for Xylem (XYL) give a sense of how its business performed in the quarter ended June 2023, it might be worth considering how some key metrics compare with Wall Street estimates and the year-ago numbers.

Xylem (XYL) Q2 Earnings: How Key Metrics Compare to Wall Street Estimates

Xylem (XYL) came out with quarterly earnings of $0.98 per share, beating the Zacks Consensus Estimate of $0.85 per share. This compares to earnings of $0.66 per share a year ago.

Xylem (XYL) Q2 Earnings and Revenues Top Estimates

WASHINGTON--(BUSINESS WIRE)-- #LetsSolveWater--Xylem Inc. (NYSE: XYL), a leading global water technology company dedicated to solving the world's most challenging water issues, today reported second-quarter results, which include the May 24 acquisition of Evoqua Water Technologies Corp. (Evoqua). The Company reported total revenue of $1.7 billion, with reported growth of 26 percent and organic growth of 15 percent, surpassing prior guidance, on strong commercial and operational execution. Orders were up 10 perce.

News for Xylem Stock (XYL)