Xylem shares fell 11.79% to $95.47 at publication on Tuesday after the water technology company delivered disappointing third-quarter results and fourth-quarter guidance. Benzinga Pro data showed Xylem shares trading at a fresh 52-week low. Third-quarter adjusted earnings reached $1.44 per share, below analysts' consensus of $1.45. Revenue reached $2,201 million, compared with expectations of $2,276 million.
Organic revenue remained approximately flat year over year because declines in Measurement and Control Solutions, Water Infrastructure, and Water Solutions and Services offset other businesses' gains. Organic orders increased 10%, supported by demand for metering solutions and data center projects. Backlog grew 13% to $5.5 billion. Pricing and productivity improvements helped adjusted EBITDA margin increase 70 basis points to 23.9%. Free cash flow reached $444 million. Net debt relative to adjusted EBITDA increased to 1.1 times after share repurchases.
Measurement and Control Solutions recorded 30% growth in organic orders and a 5% decline in organic revenue. The segment's adjusted EBITDA margin increased 270 basis points to 24.5%. The segment has $1.3 billion in backlog supporting deployments in late 2027 and 2028. Water Infrastructure organic orders declined 1% amid treatment project delays and weakness in China. Water Infrastructure organic revenue fell 1%, while adjusted EBITDA margin increased 180 basis points to 26.2%. Applied Water organic orders increased 15%, including growth exceeding 200% in data center orders. Applied Water organic revenue increased 9%. Inflation, product mix and growth investments reduced Applied Water's adjusted EBITDA margin by 40 basis points. Water Solutions and Services organic orders increased 6%, while slower project ramp-ups accompanied a 2% decline in organic revenue. The segment's adjusted EBITDA margin declined 140 basis points to 24.9%. Management attributed the weakness to project timing rather than weaker demand.
Xylem plans to sell Applied Water International and Specialty Flow Control, including beverage and marine operations, under a broader portfolio restructuring. Xylem will adopt a structure with three reporting segments on January 1, 2027. The businesses designated for sale generate about 9% of revenue but less than 5% of EBITDA. The changes are expected to lower China's contribution to company revenue from 2% to 1%. Xylem plans to allocate capital through the three reporting segments to markets with higher growth and margins beginning in 2027. Xylem secured an ultrapure water treatment project at a leading semiconductor manufacturer's fabrication facility in the United States. Xylem is also expanding cooperation with Amazon.com to supply water treatment solutions to data centers worldwide.
Xylem cut its 2026 adjusted earnings forecast from $5.55 to $5.70 per share to $5.40 to $5.45, below analysts' consensus of $5.66. Xylem lowered its 2026 revenue forecast from $9.2 billion to $8.95 billion, compared with Wall Street expectations of $9,191 million. Xylem now forecasts unchanged organic revenue for 2026, replacing an earlier projection of 2% to 3% growth. Xylem projects a full-year adjusted EBITDA margin of 23.2%, representing a 100-basis-point improvement. Xylem expects a free cash flow margin of 10.2%, matching the bottom of the previous guidance range.
Xylem forecasts fourth-quarter adjusted earnings of $1.39 to $1.44 per share, compared with analysts' consensus of $1.63. Xylem expects fourth-quarter revenue of $2.3 billion, below expectations of $2,446 million. Fourth-quarter revenue is expected to fall 5% year over year. Fourth-quarter organic revenue is projected to decline 1% to 2%. Fourth-quarter adjusted EBITDA margin is forecast to increase 130 basis points to 24.5%. Measurement and Control Solutions revenue is expected to fall sequentially before stabilizing. Water Solutions and Services is expected to resume low-single-digit growth despite continuing timing difficulties with large projects.
Xylem Stock Drops 11.79% After Q3 Earnings Miss and Downgraded Guidance
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Summary
Xylem (NYSE:XYL) stock fell 11.79% to $95.47 on Tuesday after missing Q3 earnings and cutting guidance. Adjusted EPS came in at $1.44, below the $1.45 estimate, with revenue at $2,201 million versus $2,276 million expected. Organic revenue was flat, and 2026 adjusted EPS guidance dropped to $5.40–$5.45 from $5.55–$5.70. Traders are now watching key support and resistance levels as the risk-to-reward ratio shifts following the downgrade. Xylem plans to sell two units and restructure into three segments by 2027.
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