Xylem Inc

Strong orders, but revenue conversion lagged (mixed quarter) - Q3 orders up 10% YoY; ending backlog up 13% YoY to ~$5.5B (book-to-bill >1). Momentum driven by Measurement & Control Solutions (MCS) (water & gas metering strength) and data center orders in Applied Water. - Despite healthy demand, revenue missed expectations mainly from lower MCS book/ship volume and timing of Water Solutions & Services (WSS) capital projects. Management frames this as pace/timing, not collapsing demand.

Earnings held up via execution and margin discipline - Q3 earnings delivered in line with guidance: quarterly EBITDA margin 23.9% (+70 bps YoY). - EPS +5% YoY to $1.44 (excluding benefit from IEEPA tariff refunds). - Free cash flow YTD: $444M, slightly below prior year due to working capital and investments in outsourced water contracts. - Net debt / adj. EBITDA increased to 1.1x, helped explain by opportunistic share repurchases in the quarter (a positive use of capital, but it pressured leverage).

Guidance cut: revenue down modestly in 2026, earnings still resilient - Full-year 2026 revenue: now expected down ~1% YoY to ~$8.95B (organic roughly flat vs prior year, previously guided +2% to +3%). - Full-year EBITDA margin: still expected around 23.2% (about +100 bps YoY) driven by productivity and price offsetting inflation. - Full-year EPS: now $5.40–$5.45 (down from prior $5.55–$5.70)—reflecting lower volume, while management says it remains within the company’s EPS framework. - Free cash flow margin: guided to about 10.2% at the low end of the prior range, driven by higher interest costs (Cornell/Roper financing) and repurchases. - Q4 2026: revenue expected -~5% reported and -1% to -2% organic; EBITDA margin ~24.5%; EPS $1.39–$1.44.