Xylem announced its financial results for the third quarter of 2024, showing steady growth and profitability improvements while refining its full-year guidance. The company posted $2.1 billion in revenue for Q3, marking a 1% increase on both a reported and organic basis. Earnings per share (EPS) rose sharply by 41% to $0.89, with an adjusted EPS of $1.11, reflecting a 12% increase.
Xylem’s strong quarter was bolstered by an 8% rise in orders, underscoring the resilience of demand across all its segments. Matthew Pine, Xylem’s President and CEO, expressed confidence in the results, noting the company's success in expanding margins beyond expectations. “The team delivered strong results in the quarter, with earnings at the high end of guidance, and margin expansion beating our expectations,” Pine stated. He attributed moderated organic revenue growth to the timing of certain projects but emphasized that demand remained strong.
The integration of Evoqua, acquired by Xylem in 2023, has progressed ahead of schedule, driving operational efficiencies and strengthening earnings. Pine commented, “Outperformance on margin and earnings was further reinforced by momentum in our integration of Evoqua and by initial impacts from our broader simplification efforts.” The success of these efforts has enabled the company to narrow its full-year EPS guidance, now estimated at $4.22 to $4.24, up from a previous range of $4.18 to $4.28.
In the third quarter, Xylem reported a net income of $217 million, translating to an EPS of $0.89, with a net income margin up by 300 basis points to 10.3%. Adjusted net income for the quarter was $269 million, or $1.11 per share, excluding certain items like restructuring costs and amortization related to acquired assets. These results, which underscore Xylem’s operational strength, were achieved amid a challenging macroeconomic environment.
The company's adjusted earnings before interest, tax, depreciation, and amortization (EBITDA) margin reached 21.2% for Q3, a year-over-year increase of 140 basis points. Productivity savings and pricing strategies helped drive this expansion, effectively offsetting inflation and strategic investments.
Outlook for 2024
Looking ahead, Xylem anticipates total revenue for 2024 to reach $8.5 billion, a 15% year-over-year increase. Organic revenue growth is projected at approximately 5%. The company’s adjusted EBITDA margin is forecast to be around 20.5%, with an EPS target range of $4.22 to $4.24. Additionally, Xylem expects free cash flow conversion to net income to be at least 120% by year-end.
