Xylem increases 2020 financial targets in light of profitable acquisitions
Xylem Inc. is one of the world’s leading water technology companies, and in recent years, it has deftly utilized mergers and acquisitions to get there. At its investor day earlier this month, it not only showcased the broad portfolio of products and services that this has resulted in, but also confirmed that the integration of these businesses has gone so well, it’s upping its 2020 financial guidance.
Xylem acquired both Sensus and Visenti in October 2016, resulting in the expansion of an already broad offering of water technology. This technology includes water-recycling plants, pumps used in dewatering flooded land, and more. On investor day, the focus was on ‘smart infrastructure technologies’ – the payoff from last year’s acquisitions. By ‘smart infrastructure technologies’, Xylem means internet connected systems and sensors that detect leakage throughout water infrastructural systems.
Xylem’s president and CEO, Patrick Decker, told investors:
“The addition of Sensus is reshaping the growth and profitability profile of Xylem by expanding our smart infrastructure portfolio and increasing our exposure to faster-growing end markets and geographies.
“With the combination of Sensus’ higher growth rate, the robust revenue synergies we expect to realize and our ongoing productivity initiatives, we now expect to deliver higher organic revenue growth and an additional 100 basis points of margin expansion by 2020 versus previous targets laid out in 2015.
“In addition, our ability to generate significantly more operating cash flow as well as our larger scale and leverage capacity will provide us with an additional $1.8 billion for disciplined capital deployment, which brings the total capital available for deployment from 2015 through 2020 to $5.3 billion.
With our acquired businesses serving as catalysts for accelerated growth, we are well positioned to create even more value for our stakeholders.”
Xylem is now predicting organic revenue growth of 4% to 6% - a rise from the 3% to 5% previously promised, by 2020. It is also raising its operating margin prediction by 100 basis points by 2020. On investor day, it took the opportunity to reaffirm its 2017 outlook, which includes full year revenue gains of 20% to 22%, year-on-year.
Dominion holds Xylem Inc. in its Global Trends Managed Fund.
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