The water-technology company lowered its adjusted earnings forecast to $5.40 to $5.45 a share and its revenue forecast to about $8.95 billion. It plans divestitures and a three-segment structure in 2027. Orders and backlog point the other way.
Xylem's customers ordered more in the third quarter. Xylem shipped less.
The water-technology company reported revenue of $2.20 billion, down 3% from a year earlier and flat on an organic basis, short of the $2.28 billion analysts expected, according to S&P Global. Adjusted earnings were $1.44 a share, a cent below estimates. On a GAAP basis, Xylem earned $1.25 a share.
It cut its full-year adjusted earnings forecast to $5.40 to $5.45 a share, from $5.55 to $5.70, and its revenue forecast to about $8.95 billion, from about $9.2 billion. It also said it plans divestitures and will reorganize into three segments in 2027.
The shares closed down 14.2% at $92.86, just above the session low of $92.76, a new 52-week low.
Orders against revenue
Orders tell a different story. They rose 7% to $2.33 billion, and 10% on an organic basis, and the backlog stood at $5.5 billion. Orders exceeded revenue by about 6%, which means work is building up faster than Xylem is completing it.
That gap is what investors have to judge. Rising orders and a flat-to-falling top line can mean projects are being delayed or are taking longer to convert into sales. It can also mean the revenue will arrive later rather than not at all.
The cut
The new earnings range is about 3.6% lower at its midpoint than the old one. The stock fell to its lowest level in a year after the cut, the revenue miss and the restructuring plan. Xylem did say it expects its full-year adjusted Ebitda margin to widen by about 1 percentage point, to about 23.2%.
Two readings
One reading is that this is a timing problem. Orders are up 10% organically, the backlog is large, and the reorganization and divestitures could sharpen the portfolio before 2027.
The other is that the company is struggling to turn demand into revenue. The full-year forecast came down on both lines, revenue missed, and a planned overhaul adds execution risk at the same time.
What to watch
The conversion of orders into revenue in the fourth quarter, details and timing of the divestitures, the new segment reporting in 2027, and any change to the backlog.