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1. Company Snapshot

1.a. Company Description

Xylem Inc., together with its subsidiaries, engages in the design, manufacture, and servicing of engineered products and solutions for the water and wastewater applications in the United States, Europe, the Asia Pacific, and internationally.It operates through three segments: Water Infrastructure, Applied Water, and Measurement & Control Solutions.The Water Infrastructure segment offers various products, including water, storm water, and wastewater pumps; controls and systems; filtration, disinfection, and biological treatment equipment; and mobile dewatering equipment under the Flygt, Godwin, Wedeco, Sanitaire, Leopold, Wedeco, and Xylem Vue brand names for the transportation and treatment of water.


The Applied Water segment provides pumps, valves, heat exchangers, controls, and dispensing equipment systems under the Goulds Water Technology, Bell & Gossett, A-C Fire Pump, Standard Xchange, Lowara, Jabsco, Xylem Vue and Flojet brand names for residential and commercial building services, and industrial water applications.The Measurement & Control Solutions segment provides smart meters, networked communication devices, and measurement and control technologies, as well as critical infrastructure technologies.It also offers software and services, including cloud-based analytics, remote monitoring and data management, leak detection, condition assessment, asset management, and pressure monitoring solutions, as well as testing equipment and managed services.


This segment sells its products under the Pure, Sensus, Smith Blair, WTW, Xylem Vue, and YSI brand names.The company markets and sells its products through a network of direct sales force, resellers, distributors, and value-added solution providers.Xylem Inc.


was formerly known as ITT WCO, Inc.and changed its name to Xylem Inc.in May 2011.


The company.was incorporated in 2011 and is headquartered in Rye Brook, New York.

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1.b. Last Insights on XYL

Xylem Inc.'s recent performance was negatively impacted by analysts lowering their forecasts following the company's Q4 2025 earnings release. Despite reporting record revenue and a strategic transformation, the company's more conservative outlook appears to have dampened investor sentiment. Additionally, several institutional investors, including Albion Financial Group UT, Dnca Finance, and QRG Capital Management Inc., have trimmed their stakes in the company, potentially contributing to downward pressure. The company's 80/20 strategy, prioritizing profitability over some sales, may also be seen as a double-edged sword.

1.c. Company Highlights

2. Xylem's Q4 2025 Earnings: A Strong Finish to a Record Year

Xylem reported a robust Q4 2025, with revenue growing 4% year-over-year, and a record EBITDA margin of 23.2%, up 220 basis points. The company's EPS came in at $1.37, slightly below estimates of $1.42, still representing a 20% increase over the prior year. For the full year, revenue growth was 5%, with an EBITDA margin of 22.2%, up 160 basis points. The strong performance was driven by the company's operating model transformation, with phase one completed and phase two underway, focusing on strengthening the growth engine.

Publication Date: Feb -11

📋 Highlights
  • Record Q4 Performance:: Revenue grew 4%, EBITDA margin hit 23.2% (up 220 bps YoY), and EPS reached $1.42 (20% YoY increase).
  • 2026 Outlook:: Organic revenue growth of 1-3%, EBITDA margin of 22.9-23.3% (70-110 bps expansion), and EPS of $5.35-$5.60 (8% midpoint growth).
  • 80/20 Initiative Impact:: Expected 2% top-line headwind in 2026, with 80% of the business in implementation phases to drive simplicity and resource efficiency.
  • Capital Deployment:: $250M in M&A last year; targets ~$1B annually, prioritizing core investments, M&A, dividends, and buybacks.
  • Margin Expansion:: 70-110 bps EBITDA margin improvement expected in 2026, surpassing the 2023 23% target, driven by operational efficiency and mix optimization.

Segment Performance

The company's segments performed well, with Measurement and Control Solutions (MCS) expected to grow in the mid-single digits, driven by energy meters. Water Infrastructure and Applied Water are expected to grow in the low single digits, while Water Solutions and Services (WSS) is expected to deliver mid-single-digit growth driven by strength in outsourced water projects and solid demand in dewatering.

Outlook and Guidance

Xylem provided its 2026 outlook, expecting organic revenue growth of 1-3%, with a full-year revenue range of $9.1 billion to $9.2 billion. EBITDA margin is expected to be 22.9-23.3%, representing 70-110 basis points of expansion. EPS is expected to be $5.35-$5.60, up 8% at the midpoint. The company is accelerating its 80/20 efforts around product and customer simplification, expecting an outsized headwind to its top line for 2026 of roughly 2%.

Valuation and Metrics

With a P/E Ratio of 32.79 and EV/EBITDA of 26.04, the market is pricing in a certain level of growth and profitability. The company's ROE of 8.59% and ROIC of 6.42% indicate a reasonable return on equity and invested capital. Analysts estimate next year's revenue growth at 5.1%, which is slightly higher than the company's guidance. The dividend yield of 1.24% and free cash flow yield of 2.9% provide a reasonable return for investors.

Growth Initiatives

The company is transitioning into phase two of its operating model transformation, focusing on leveraging simplicity, speed, and accountability to build a growth engine. Key areas of focus include Salesforce effectiveness, improving product life cycle management and innovation, and enhancing customer value. The goal is to have sales teams spend 75-80% of their time facing customers, up from 40-50% currently.

China Market and MCS Segment

The China market remains challenging, with intense price competition and economic headwinds. The company is applying an 80/20 lens to focus on higher-quality, more profitable opportunities and has reduced headcount by over 40%. The MCS segment had solid orders, but below expectations, with the company remaining confident in achieving high single-digit long-term growth.

3. NewsRoom

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Elo Mutual Pension Insurance Co Grows Position in Xylem Inc. $XYL

Mar -03

Source: defenseworld.net

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Xylem Inc. $XYL Shares Sold by Artisan Partners Limited Partnership

Feb -27

Source: defenseworld.net

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Xylem Inc. Announces $1.5 Billion Share Repurchase Authorization

Feb -25

Source: businesswire.com

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Market Today: AMD--Meta AI pact, WBD bid war, Stripe at $159B

Feb -24

Source: gurufocus.com

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First Look: Gilead buys Arcellx; IBM sinks on AI; Bitcoin slides

Feb -24

Source: gurufocus.com

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Xylem Inc. $XYL Shares Bought by Lansforsakringar Fondforvaltning AB publ

Feb -23

Source: defenseworld.net

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BNP PARIBAS ASSET MANAGEMENT Holding S.A. Trims Stake in Xylem Inc. $XYL

Feb -20

Source: defenseworld.net

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Aberdeen Group plc Acquires 12,297 Shares of Xylem Inc. $XYL

Feb -16

Source: defenseworld.net

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (6.14%)

6. Segments

Water Infrastructure (Excl. Measurement & Control Solutions)

Expected Growth: 6.2%

Growing demand for efficient water management, increasing investments in wastewater treatment infrastructure, and Xylem’s innovative product portfolio drive growth in the water and wastewater transportation, treatment, and drainage segment.

Applied Water

Expected Growth: 7.4%

Xylem Inc. growth driven by its focus on water infrastructure, wastewater treatment, and industrial process optimization, positioning it for growth in the water and wastewater treatment market, with increasing demand for efficient and sustainable solutions.

Water Solutions & Services

Expected Growth: 6.5%

Growing need for efficient water management and infrastructure development, increasing adoption of digital solutions, and stringent regulations drive growth in Xylem’s Water Solutions & Services segment.

Measurement & Control Solutions

Expected Growth: 4.4%

Xylem's solutions address growing concerns around water scarcity, driven by increasing urbanization and water quality regulations, enabling the company to leverage its expertise in measurement, control, and treatment to drive growth.

7. Detailed Products

Water Infrastructure

Xylem's water infrastructure products provide solutions for water and wastewater transportation, treatment, and management.

Wastewater Transport

Xylem's wastewater transport products provide solutions for wastewater collection, treatment, and disposal.

Dewatering

Xylem's dewatering products provide solutions for water removal and management in construction, mining, and industrial applications.

Industrial Process

Xylem's industrial process products provide solutions for water and wastewater treatment, and fluid handling in industrial applications.

Commercial Building Services

Xylem's commercial building services provide solutions for water and energy efficiency, and HVAC systems in commercial buildings.

Residential and Commercial Water

Xylem's residential and commercial water products provide solutions for water treatment, pumping, and dispensing in residential and commercial applications.

8. Xylem Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

Xylem Inc. operates in a niche market with limited substitutes, but the threat of substitutes is still present due to the increasing competition in the water and wastewater treatment industry.

Bargaining Power Of Customers

Xylem Inc. has a diverse customer base, which reduces the bargaining power of individual customers. Additionally, the company's products and services are often critical to its customers' operations, making it difficult for customers to negotiate prices.

Bargaining Power Of Suppliers

Xylem Inc. relies on a network of suppliers for raw materials and components. While the company has some bargaining power due to its size, suppliers may still have some leverage due to the specialized nature of some components.

Threat Of New Entrants

The water and wastewater treatment industry has high barriers to entry, including significant capital requirements and regulatory hurdles. This makes it difficult for new entrants to compete with established players like Xylem Inc.

Intensity Of Rivalry

The water and wastewater treatment industry is highly competitive, with several established players competing for market share. Xylem Inc. faces intense competition from companies like SUEZ, American Water, and Evoqua Water Technologies.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 19.03%
Debt Cost 3.95%
Equity Weight 80.97%
Equity Cost 9.32%
WACC 8.30%
Leverage 23.51%

11. Quality Control: Xylem Inc. passed 5 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Stock-Card
Xylem

A-Score: 5.6/10

Value: 2.3

Growth: 5.6

Quality: 6.7

Yield: 2.0

Momentum: 7.5

Volatility: 9.3

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AMETEK

A-Score: 5.3/10

Value: 1.8

Growth: 5.8

Quality: 7.7

Yield: 1.0

Momentum: 6.0

Volatility: 9.3

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Howmet Aerospace

A-Score: 5.1/10

Value: 0.0

Growth: 6.8

Quality: 6.7

Yield: 0.0

Momentum: 9.5

Volatility: 7.7

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Otis

A-Score: 5.1/10

Value: 4.4

Growth: 4.4

Quality: 5.5

Yield: 3.0

Momentum: 4.0

Volatility: 9.0

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Roper Technologies

A-Score: 5.0/10

Value: 3.0

Growth: 5.6

Quality: 7.4

Yield: 1.0

Momentum: 3.0

Volatility: 10.0

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Ingersoll Rand

A-Score: 4.2/10

Value: 2.1

Growth: 7.4

Quality: 6.0

Yield: 0.0

Momentum: 2.5

Volatility: 7.3

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

122.35$

Current Price

122.35$

Potential

-0.00%

Expected Cash-Flows