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NEW YORK (TheStreet) -- Shares of Xylem Inc.  (XYL) - Get Free Report are up 2.80% to $36.35 after the company reported that its 2014 first quarter revenue increased 3%.

The provider of equipment and service for water and wastewater applications saw its revenue increase to $906 million, passing 12 analysts' estimates of $887 million, Bloomberg reports.

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First quarter 2014 adjusted net income was $63 million or 34 cents per share, up 7 cents or 26% over first quarter 2013. GAAP net income was $49 million or 27 cents, up 5 cents or 23%. 

The company said it maintains full-year outlook of adjusted EPS of $1.85 to $2.00 on revenue of approximately $4 billion.

TheStreet Ratings team rates XYLEM INC as a Buy with a ratings score of B+. TheStreet Ratings Team has this to say about their recommendation:

"We rate XYLEM INC (XYL) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, expanding profit margins and solid stock price performance. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 6.1%. Since the same quarter one year prior, revenues slightly increased by 6.6%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • The current debt-to-equity ratio, 0.55, is low and is below the industry average, implying that there has been successful management of debt levels. To add to this, XYL has a quick ratio of 1.58, which demonstrates the ability of the company to cover short-term liquidity needs.
  • 43.27% is the gross profit margin for XYLEM INC which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 6.58% trails the industry average.
  • Compared to its closing price of one year ago, XYL's share price has jumped by 29.28%, exceeding the performance of the broader market during that same time frame. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.
  • XYLEM INC's earnings per share declined by 5.1% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, XYLEM INC reported lower earnings of $1.23 versus $1.59 in the prior year. This year, the market expects an improvement in earnings ($1.95 versus $1.23).
  • You can view the full analysis from the report here: XYL Ratings Report

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