The 5 Most Interesting Analyst Questions From Xylem's Q2 Earnings Call

Xylem delivered a well-received second quarter, with the market responding positively to strong execution and outperformance versus Wall Street expectations. Management attributed the results primarily to broad-based organic growth across its business units—especially in measurement and control solutions—and robust demand for advanced metering and treatment solutions. CEO Matthew Pine emphasized that productivity initiatives, supply chain actions, and targeted pricing more than offset the impact of tariffs and inflation. Pine highlighted, “Our pricing and supply chain actions more than offset inflation and tariff-related costs,” underscoring the value of operational discipline and simplification efforts in enhancing both margins and customer responsiveness.

Is now the time to buy XYL? Find out in our full research report (it’s free).

While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.

Our Top 5 Analyst Questions From Xylem’s Q2 Earnings Call

• Michael Patrick Halloran (Baird) asked about normalization in measurement and control solutions (MCS) backlog and outlook for order trends. CEO Matthew Pine explained resilient demand, except for China, and expects MCS book-to-bill to return positive by year-end.
• Andrew Alec Kaplowitz (Citigroup) requested more details on Applied Water’s growth and the impact of the 80/20 operational model. Pine responded that simplification is improving margins and allowing the team to focus on higher-value growth opportunities, especially in commercial buildings.
• Deane Michael Dray (RBC Capital Markets) questioned the return profile and strategic fit of recent acquisitions. Pine highlighted the high synergies and scalability of Vacom and Envirex, while CFO Bill Grogan described these as high-return, low-risk deals aligned with core strategy.
• Nathan Hardie Jones (Stifel) raised concerns about potential cuts to U.S. municipal utility funding. Pine addressed that most demand is operational rather than capital-driven and that state revolving fund (SRF) exposure is limited, reducing risk from federal budget changes.
• Tyler Roger Bisset (Goldman Sachs) sought clarification on margin guidance and the impact of tariffs. Grogan said that while tariffs are slightly dilutive, pricing and operational discipline should largely offset the effect, with contingencies for further volatility.

Catalysts in Upcoming Quarters

In the coming quarters, our analysts will watch (1) the pace at which Xylem’s measurement and control solutions segment recovers as destocking and replacement cycles progress, (2) further improvements in operating margins from continued simplification and the roll-off of legacy projects, and (3) the successful integration and scaling of recent niche acquisitions in advanced water treatment. Developments in tariffs, supply chain adjustments, and U.S. infrastructure funding will also be important indicators of execution and resilience.

Xylem currently trades at $143.43, up from $130.69 just before the earnings. Is there an opportunity in the stock?Find out in our full research report (it’s free).

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