A month has gone by since the last earnings report for Xylem (XYL). Shares have added about 1.7% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Xylem due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Xylem Q2 Earnings & Revenues Beat, '24 View Raised

Xylem’s second-quarter 2024 adjusted earnings of $1.09 per share surpassed the Zacks Consensus Estimate of $1.06. Also, the bottom line increased 11% year over year.

XYL’s revenues of $2.17 billion beat the consensus estimate of $2.16 billion. The top line jumped 26% year over year, driven by strong commercial and operational execution, and resilient demand. Organic revenues in the quarter rose 9%.

Orders of $2.09 billion increased 12% year over year. Organically, orders were down 1%.

Segmental Details

Revenues in the Water Infrastructure segment totaled $631 million, up 22% year over year. Organic sales increased 7% year over year, buoyed by price realization and growth across all regions and applications.

The Applied Water segment generated revenues of $456 million, down 5% year over year. Organic sales fell 4% on a year-over-year basis. The segmental performance was hurt by softness in developed markets and an unfavorable mix. The Zacks Consensus Estimate was pegged at $453 million.

Quarterly revenues at the Measurement & Control Solutions segment totaled $482 million, up 26% year over year. The Zacks Consensus Estimate was pegged at $470 million. Organic sales were up 26% year over year, driven by smart metering demand and execution.

Quarterly revenues at the Water Solutions and Services segment totaled $600 million, up 76% year over year. Organic sales were up 12% year over year, driven by large long-term outsourced water contracts.

Margin Profile

Xylem’s adjusted EBITDA was $452 million, up 37.3% from the year-ago quarter’s level. The margin improved to 20.8% from 19.1% in the prior year.

Adjusted operating income was $352 million, up 35.9% year over year. Adjusted operating margin increased to 16.2% from 15% in the year-earlier quarter.

Balance Sheet and Cash Flow

Exiting the second quarter, Xylem had cash and cash equivalents of $815 million compared with $1.02 billion at the end of December 2023. Long-term debt was $1.98 billion at the end of the quarter compared with $2.3 billion at the end of December 2023.

In the first six months of 2024, XYL generated net cash of $377 million from operating activities compared with $9 million generated in the year-ago period. 

Capital expenditure was $147 million, up 42.7% from the year-earlier quarter. Free cash flow was $230 million in the first six months of the year against free cash outflow of $61 million in the prior year.

Rewards to Shareholders

In the first six months of 2024, Xylem paid dividends of $175 million, up 25.9% year over year. The company also bought back shares worth $18 million in the same period compared with $9 million worth of shares repurchased in the year-ago period.