Xylem (XYL) AI Stock Analysis

Compare

882 Followers

Top Page

Xylem

(NYSE:XYL)

Select Model

Neutral 68 (OpenAI - 5.2)

Rating:68Neutral

Price Target:

$140.00

▲(8.06% Upside)

Action:DowngradedDate:02/26/26

The score is led by strong underlying financial performance and constructive FY26 guidance for margin and EPS expansion. These positives are tempered by weak current technical momentum and a premium valuation, with additional near-term uncertainty from China weakness, project timing variability, and softer recent free-cash-flow growth.

Positive Factors

Multi-year Revenue Expansion

Nearly doubling revenue since 2020 reflects durable scale across municipal, industrial and service end markets. A larger installed base supports recurring aftermarket, parts and service revenue, smoothing cycles and underpinning long‑term earnings resilience beyond quarter-to-quarter volatility.

Margin Expansion & Transformation

Management is targeting meaningful margin expansion driven by productivity, simplification and on‑time performance improvements. Sustained 70–110 bps margin gains reflect structural cost and mix improvements that can raise sustainable profitability and cash generation over the medium term.

Growing Digital / Recurring Business

Rapid growth in the digital business increases recurring, higher‑margin revenue and strengthens customer stickiness. Expanding software, analytics and monitoring offerings diversify the revenue mix and provide structural upside from subscription and services models over coming years.

Negative Factors

China Market Weakness

Severe China weakness drives material headwinds in a key geography and segment. Given the size of the decline and notable order drops, recovery could take many quarters, reducing revenue diversification and making near‑term growth and backlog conversion more uncertain across the business.

Intentional Top-line Sacrifice (80/20)

Exiting low‑quality product/customer revenue improves long‑term earnings quality but creates a durable near‑term growth drag. The intentional ~2% headwind reduces reported top‑line momentum and can make revenue comparisons and market share gains harder to achieve over the next 2–6 months.

Free Cash Flow Variability

A decline in free cash flow and lower cash coverage weakens short‑term financial flexibility despite low leverage. If FCF variability persists it constrains discretionary actions (buybacks, M&A, capex prioritization) and reduces the buffer for absorbing project timing delays or regional downturns.

Xylem (XYL) vs. SPDR S&P 500 ETF (SPY)

Market Cap

$31.50B

Dividend Yield1.15%

Average Volume (3M)1.91M

Price to Earnings (P/E)33.0

Beta (1Y)1.01

Revenue Growth5.56%

EPS Growth13.76%

CountryUS

Employees23,000

SectorIndustrials

Sector Strength72

IndustryIndustrial - Machinery

Share Statistics

EPS (TTM)1.42

Shares Outstanding243,141,400

10 Day Avg. Volume1,795,737

30 Day Avg. Volume1,905,186

Financial Highlights & Ratios

PEG Ratio4.89

Price to Book (P/B)2.89

Price to Sales (P/S)3.67

P/FCF Ratio36.42

Enterprise Value/Market Cap1.02

Enterprise Value/Revenue3.54

Enterprise Value/Gross Profit9.21

Enterprise Value/Ebitda17.94

Forecast

1Y Price Target

$160.55

Price Target Upside23.92% Upside

Rating ConsensusStrong Buy

Number of Analyst Covering12

EPS Forecast (FY)5.5

Revenue Forecast (FY)$9.20B

Xylem Business Overview & Revenue Model

Company DescriptionXylem 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.

How the Company Makes MoneyXylem generates revenue through multiple streams, primarily from the sale of its water technology products and services. Key revenue streams include the sale of pumps, treatment equipment, and related services, as well as recurring revenue from maintenance contracts and spare parts. The company benefits from significant partnerships with municipalities and industries that require efficient water management solutions. Additionally, Xylem engages in research and development to innovate and enhance its product offerings, which helps maintain its competitive edge and drives growth in emerging markets and sectors focused on sustainability.

Xylem Key Performance Indicators (KPIs)

Any

Revenue by Segment

Revenue by Segment
Breaks down income from various business segments, revealing which parts of the company are driving growth and where there may be challenges.

Chart InsightsXylem's Measurement and Control Solutions and Water Solutions and Services segments are driving robust growth, with double-digit increases in revenue. The recent earnings call highlighted a strong performance, particularly in these segments, despite challenges like order declines and softness in China. The company raised its full-year revenue guidance, reflecting confidence in its strategic initiatives. The divestiture of the international metering business is expected to enhance margins further. Investors should note the focus on portfolio optimization and capital deployment, which positions Xylem well for sustained growth amid macroeconomic uncertainties.

Data provided by:

The Fly

Xylem Earnings Call Summary

Earnings Call Date:Feb 10, 2026

(Q4-2025)

% Change Since: |

Next Earnings Date:May 05, 2026

Earnings Call Sentiment Positive

The call conveyed a positive overall picture driven by record results, meaningful margin expansion, a strong balance sheet, and clear operational progress from the transformation program. Management acknowledged near-term top-line headwinds from accelerated 80/20 simplification, project timing variability (notably in smart metering) and significant China market weakness, all of which temper the near-term revenue cadence. Guidance projects modest organic growth in 2026 with continued margin expansion and EPS growth, indicating management expects the positive operating leverage and quality-of-earnings improvements to outweigh short-term revenue sacrifices.

Q4-2025 Updates

Positive Updates

Record Q4 and Full-Year Results

Delivered record revenue, EBITDA, and earnings per share for both Q4 and full year 2025. Q4 EPS was $1.42, up 20% year-over-year. Full-year revenue grew 5% with full-year EBITDA margin expanding 160 basis points to 22.2%; Q4 EBITDA margin was 23.2%, up 220 basis points versus prior year.

Top-line and Order Momentum

Quarterly revenue grew 4% and orders were up 7% in Q4 (orders up 2% for the full year). Backlog finished the year at $4.6 billion, providing a foundation for 2026 execution.

Strong MCS Performance

Measurement & Control Solutions (MCS) orders rose ~22%, revenue up 10%, and segment EBITDA margin improved by ~310 basis points to 20.2%, driven by smart metering and energy meter demand.

Significant Margin Expansion in Water Infrastructure

Water Infrastructure segment delivered a 510 basis-point improvement in EBITDA margin (driven by productivity, price, and mix) with flat revenue overall and strong US double-digit growth offsetting weakness in China.

WSS and Digital Momentum

Water Solutions & Services (WSS) saw orders +7% and revenue +4% with an EBITDA margin of 23.9% (up 110 bps). Xylem View (digital business) doubled in 2025 and is expected to grow 30%+ in 2026.

Prudent Balance Sheet and Cash Deployment

Net debt to adjusted EBITDA was 0.2x (strong leverage position). Management deployed ~$250M on M&A in 2H25 and targets ~$1B/year for M&A; remain opportunistic on buybacks while prioritizing investments and acquisitions.

2026 Guidance — Modest Top-Line Growth with Margin Expansion

Full-year 2026 revenue guidance of $9.1–$9.2B (1–3% reported, 2–4% organic) with adjusted EBITDA margin expected to expand ~70–110 bps versus 2025. EPS guidance $5.35–$5.60 (approximately +8% at midpoint).

Operational Transformation Progress

Operational improvements cited as key drivers: on-time performance improved ~500 basis points, leadership engagement high (top 150 leaders ~90% would recommend Xylem), simplification actions in ~80% of business, and productivity gains contributing materially to margin expansion.

Negative Updates

Short-term Top-line Headwind from 80/20 Simplification

Management expects an outsized ~2% one-year top-line headwind in 2026 from accelerated 80/20 product/customer simplification (doubling the impact vs 2025) as lower-quality revenue is intentionally exited to improve long-term earnings quality.

Project Timing Delays in Smart Metering (MCS)

Several larger smart-metering projects pushed out into 2026, leaving MCS orders below internal expectations despite strong growth; MCS guidance indicates Q1 will be challenged (down low single digits) and project timing remains more variable.

China Market Weakness

China experienced pronounced softness: nearly 30% revenue decline in China for Water Infrastructure in Q4 and Q4 China orders down ~70% per management comments. Company reduced China headcount >40% and expects continued weakness in the near term, impacting first-half 2026 results.

Applied Water One-time Items and Near-term Margin Variability

Applied Water experienced negative project mix, execution timing and some one-time items in Q4 that pulled margins down; management expects the segment to be back in the ~20% EBITDA range in Q1 and to improve sequentially through the year.

Lumpiness and Variability in WSS

WSS remains project-driven and therefore quarter-to-quarter revenue and orders can be variable despite strong backlog (~$1.4B cited for the segment), adding forecasting uncertainty.

Free Cash Flow and Near-term Cash Impact from Actions

Year-to-date free cash flow decreased ~2% vs prior year due to outsourced water projects, system investments, and restructuring costs—though management characterized this as in-line with expectations.

Divestiture EPS Impact and Portfolio Reduction

Planned divestiture of the international metering (metrology) business (~$250M revenue, <10% EBITDA margin) will close end of Q1 and is expected to have a modest EPS headwind (roughly $0.02–$0.03 for the year); company indicated total potential divestiture opportunity is smaller than prior ~10% estimate.

Company Guidance

The company guided to full-year 2026 revenue of $9.1–$9.2 billion (1–3% reported growth, 2–4% organic), adjusted EBITDA margin of roughly 22.9%–23.3% (up 70–110 bps vs. FY25’s 22.2%), and EPS of $5.35–$5.60 (≈+8% at the midpoint), while reiterating a long‑term commitment to low‑double‑digit free cash flow margin and progress on that in 2026. For Q1 they expect reported revenue growth of 1–2% (flat organic), EBITDA margin ~20.5–21.0% and EPS $1.06–$1.11; full‑year guidance assumes an outsized ~2% top‑line headwind from accelerated 80/20 simplification actions. Recent operating metrics underpin the outlook: year‑end backlog $4.6B (book‑to‑bill ~1), Q4 orders +7% (FY orders +2%), Q4 revenue +4% (FY +5%), Q4 adjusted EBITDA margin 23.2% (+220 bps YoY) and Q4 EPS $1.42 (+20% YoY); segment details include MCS backlog ~$1.4B (Q4 orders +22%, revenue +10%, EBITDA margin 20.2%), Water Infrastructure orders -1%/revenue flat (China down ~30%), Applied Water orders +5/revenue +3 (EBITDA up 60 bps; targeting ~20% in Q1), and WSS orders +7/revenue +4 (EBITDA 23.9%). Net debt/adjusted EBITDA was ~0.2x and YTD free cash flow was down ~2% as expected.

Xylem Financial Statement Overview

Summary

Strong multi-year fundamentals with nearly doubled revenue since 2020, improved operating and net margins, and sharply reduced leverage. The key offsets are the 2025 dip in EBITDA margin versus 2024 and a 2025 pullback in free cash flow growth and debt coverage.

Income Statement

Very Positive

Revenue has expanded strongly over the period (from ~$4.9B in 2020 to ~$9.0B in 2025), with 2024–2025 showing continued growth. Profitability has improved meaningfully versus earlier years: net margin rose from ~5.2% (2020) to ~10.6% (2025), and operating margin increased to ~13.5% (2025). Gross margin has been steady in the high-30% range, supporting earnings consistency. Key watch-out: growth has been uneven year-to-year and EBITDA margin dipped in 2025 versus 2024, suggesting some recent cost/integration or mix pressure despite higher operating profit.

Balance Sheet

Positive

Leverage has improved materially, with debt-to-equity declining from ~1.06 (2020) to ~0.17 (2025), indicating a stronger capital structure and better financial flexibility. Equity has grown substantially over time, supporting balance sheet resilience. Returns on equity are steady in the ~8% range in the last two years, reflecting decent profitability but not standout capital efficiency. Overall risk looks moderate, though returns are not accelerating despite the larger revenue base.

Cash Flow

Positive

Cash generation is solid, with operating cash flow around $1.2B and free cash flow around $0.9B in 2025. Free cash flow is generally well-supported by earnings (free cash flow at ~73% of net income in 2025), indicating reasonable earnings quality. However, free cash flow growth turned negative in 2025 after improving in prior years, and operating cash flow covers less than half of total debt in 2025 (down versus 2024), which reduces near-term deleveraging capacity if that softness persists.

Breakdown	Dec 2025	Dec 2024	Dec 2023	Dec 2022	Dec 2021
Income Statement
Total Revenue	9.04B	8.56B	7.36B	5.52B	5.20B
Gross Profit	3.48B	3.21B	2.72B	2.08B	1.98B
EBITDA	1.78B	1.69B	1.12B	726.00M	832.00M
Net Income	957.00M	890.00M	609.00M	355.00M	427.00M
Balance Sheet
Total Assets	17.63B	16.49B	16.11B	7.95B	8.28B
Cash, Cash Equivalents and Short-Term Investments	1.48B	1.12B	1.02B	944.00M	1.35B
Total Debt	1.94B	2.13B	2.39B	1.95B	2.51B
Total Liabilities	5.88B	5.62B	5.94B	4.45B	5.05B
Stockholders Equity	11.48B	10.64B	10.17B	3.49B	3.22B
Cash Flow
Free Cash Flow	910.00M	942.00M	566.00M	388.00M	330.00M
Operating Cash Flow	1.24B	1.26B	837.00M	596.00M	538.00M
Investing Cash Flow	-471.00M	-482.00M	-628.00M	-191.00M	-183.00M
Financing Cash Flow	-501.00M	-615.00M	-157.00M	-790.00M	-855.00M

Xylem Technical Analysis

Technical Analysis Sentiment

Negative

Last Price129.56

Price Trends

50DMA

136.26

Negative

100DMA

140.15

Negative

200DMA

137.01

Negative

Market Momentum

MACD

-2.54

Negative

RSI

43.49

Neutral

STOCH

68.22

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For XYL, the sentiment is Negative. The current price of 129.56 is below the 20-day moving average (MA) of 132.04, below the 50-day MA of 136.26, and below the 200-day MA of 137.01, indicating a bearish trend. The MACD of -2.54 indicates Negative momentum. The RSI at 43.49 is Neutral, neither overbought nor oversold. The STOCH value of 68.22 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for XYL.

Xylem Risk Analysis

Xylem disclosed 26 risk factors in its most recent earnings report. Xylem reported the most risks in the "Finance & Corporate" category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

Xylem Peers Comparison

Overall Rating

UnderperformOutperform

Sector (63)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
WTS	80 Outperform	$10.96B	32.31	18.25%	0.70%	4.18%	16.05%
ITT	78 Outperform	$17.42B	33.14	17.85%	0.79%	8.01%	2.67%
NDSN	76 Outperform	$16.37B	31.72	17.47%	1.64%	3.78%	4.85%
FLS	73 Outperform	$11.27B	33.49	16.49%	1.17%	3.19%	69.89%
XYL	68 Neutral	$31.50B	33.03	8.65%	1.15%	5.56%	13.76%
PNR	68 Neutral	$16.19B	25.11	17.48%	0.96%	0.83%	-1.32%
Sector *	63 Neutral	$10.79B	15.43	7.44%	2.01%	2.89%	-14.66%

* Industrials Sector Average

Performance Comparison

XYL

Xylem

129.56

1.35

1.05%

FLS

Flowserve

88.52

36.57

70.40%

ITT

202.41

66.21

48.61%

NDSN

Nordson

293.44

89.33

43.77%

PNR

Pentair

99.19

8.38

9.23%

WTS

Watts Water Technologies

328.74

120.53

57.89%

Xylem Corporate Events

Business Operations and StrategyStock Buyback

Xylem Authorizes New $1.5 Billion Share Repurchase Program

Positive

Feb 25, 2026

On February 25, 2026, Xylem Inc.’s Board of Directors approved a new share repurchase program authorizing the company to buy back up to $1.5 billion of its common stock with a par value of $0.01. The authorization has no expiration date and allows repurchases through open market purchases or other methods, subject to applicable laws and regulations.

The program does not require Xylem to repurchase a specific amount of shares and can be suspended at the company’s discretion, giving management flexibility in capital allocation. This move signals the board’s willingness to return capital to shareholders and may support the stock by reducing share count over time, depending on how actively the authorization is used.

The most recent analyst rating on (XYL) stock is a Hold with a $135.00 price target. To see the full list of analyst forecasts on Xylem stock, see the XYL Stock Forecast page.

Glossary

BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.Date of analysis: Feb 26, 2026