Xylem

In the second quarter of 2026 Xylem booked 3.1 billion dollars of new orders, up 42 percent from a year earlier. That pushed the backlog to about 5.3 billion dollars, helped by an 850 million dollar contract with Dow Chemical that runs for 23 years. Orders from data centers for liquid cooling and water management jumped more than 300 percent. Orders turn into revenue later, so this is work already won but not yet paid for.

Even with sales barely moving, Xylem keeps squeezing more profit out of each sale. Its adjusted profit margin reached 23.3 percent last quarter, about one and a half percentage points better than a year earlier. Adjusted earnings hit 5.08 dollars per share in 2025, up 19 percent, and management has raised the 2026 target twice to a range of 5.55 to 5.70 dollars. The dividend has risen 16 years in a row and went up another 8 percent to 43 cents a quarter.

The shares are down about 20 percent over the past year, from roughly 139 dollars to 111 dollars, and sit about 27 percent below their 52-week high of 152 dollars. The reason is simple. Sales have stopped growing. Underlying revenue growth slid from 7 percent in late 2025 to 4 percent, then to zero, then to just 1 percent last quarter. Until that turns, the share price may keep drifting.

Revenue in China fell 27 percent year over year last quarter, and many city water departments are refinancing old debt at far higher interest rates, which pushes equipment upgrades down the priority list. There is also a wide gap between headline and official earnings. Reported earnings were 3.92 dollars per share in 2025 versus adjusted earnings of 5.08 dollars, a difference driven by restructuring and write-down charges of 103 million dollars.