Xylem Reports Solid First Quarter Earnings


Xylem Inc. reported first quarter 2015 net income of $64 million, or $0.35 per share. Excluding the gain from the sale of businesses, restructuring and realignment charges and other special items, adjusted net income was $60 million or $0.33 per share, a decrease of one cent or three percent from the comparable period in 2014.

First quarter revenue was $837 million, up one percent organically, reflecting strength in emerging markets and the U.S. First quarter adjusted operating margin improved 40 basis points, driven by increased operating efficiencies and lower expenses.

“We are off to a solid start in 2015 as we continue to advance our strategy,” said Patrick Decker, President and Chief Executive Officer of Xylem. “We saw continued strength in emerging markets and growing momentum in the U.S. Our Water Infrastructure segment generated solid growth in orders during the quarter, including double-digit growth in treatment orders. A great example is the $16 million order we secured to upgrade the drinking water treatment plants and distribution systems of a Canadian municipality.”

Decker continued, “Despite the ongoing negative impact of foreign exchange translation, the fundamentals of our core business continue to improve. This was evident in our ability to drive a nine-percent increase in year-over-year adjusted earnings per share in the first quarter, excluding these foreign exchange headwinds. Looking ahead, we will focus on accelerating operational improvements as we continue to strengthen key capabilities in the organization.”

During the first quarter 2015, Xylem repurchased 1.4 million shares of common stock under its stock repurchase program for an aggregate purchase price of $50 million. As of March 31, 2015, Xylem had approximately $50 million remaining under its current stock repurchase authorizations.

Full-year 2015 Outlook

Xylem is maintaining its operational outlook for its full-year guidance. The Company, however, is adjusting its 2015 guidance to reflect the significant foreign exchange fluctuations that have occurred since the Company’s previous forecast was announced in February. As a result of the projected unfavorable impact of foreign exchange translation, Xylem now expects full-year 2015 revenue of approximately $3.7 billion, a decrease of seven to eight percent from the full-year 2014 results. On an organic basis, Xylem continues to anticipate revenue growth in the range of one to three percent.

Full-year 2015 adjusted operating income is now expected to be in the range of $469 to $494 million, resulting in adjusted earnings per share of $1.80 to $1.90. Excluding the projected unfavorable impact of foreign exchange translation, Xylem’s adjusted earnings per share growth expectations remain unchanged in the range of five to 10 percent over the comparable full-year 2014 results. The Company’s outlook for projected restructuring and realignment costs of $20 million for the year also remains unchanged.

First Quarter Segment Results

Water Infrastructure

Xylem’s Water Infrastructure segment consists of its businesses serving clean water delivery, wastewater transport and treatment, dewatering and analytical instrumentation.

  • First quarter 2015 Water Infrastructure revenue was $500 million, flat relative to the prior year period on an organic basis. Growth in emerging markets was driven by continued investment in the development of water and wastewater infrastructure, which was offset by the timing of prior-year project deliveries in Australia as well as market softness there and in Canada.
  • First quarter adjusted segment operating income was $53 million, down from $58 million in the prior year, reflecting the unfavorable impact of foreign exchange translation. Adjusted operating margin for the quarter increased 10 basis points to 10.6 percent, primarily driven by the impact of cost reductions, which was partially offset by inflation.

Applied Water

Xylem’s Applied Water segment consists of its portfolio of businesses in residential and commercial building services, and industrial and agricultural applications.

  • First quarter 2015 revenue was $337 million, up two percent organically compared with the first quarter 2014. This growth was driven by strength in our U.S. commercial building services business, partially offset by the impact of softening markets in agriculture.
  • First quarter adjusted segment operating income was $47 million, flat versus the comparable period last year. The impact of productivity actions and cost reductions helped to drive a 60-basis-point increase in the adjusted operating margin for the segment to 13.9 percent. This margin expansion included the absorption of a 30-basis-point negative impact from foreign exchange translation.

Source: Xylem Inc.

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