10 Best Water Recycling Stocks to Buy

4. Xylem Inc. (NYSE:XYL)

Number of Hedge Fund Holders: 41

Xylem Inc. (NYSE:XYL) supplies equipment and services that help utilities and industrial customers transport, treat, and reuse water. Its investment case depends on converting a growing order book into revenue while improving profitability.

That conversion slowed in Q3 2026. Organic revenue was roughly flat as utility customers delayed purchases and large treatment projects progressed more slowly than expected. However, orders increased 10% organically, and backlog rose 13% year-over-year to $5.5 billion. Water Solutions and Services orders grew 6% organically, indicating continued customer commitments despite slower execution.

Industrial treatment offers another source of growth. Xylem Inc. secured an ultrapure-water technology contract for a US semiconductor facility and expanded its work with Amazon into data-center treatment projects. These wins could broaden demand beyond municipal spending.

Operational improvements are also helping. Xylem Inc.’s quarterly adjusted EBITDA margin increased 70 basis points to 23.9%, despite the revenue shortfall. Planned divestitures would remove businesses representing approximately 9% of revenue but less than 5% of EBITDA, potentially improving the remaining portfolio’s profitability.

The market nevertheless punished the weaker outlook, with Xylem’s 14.21% post-earnings decline placing it among October 27’s biggest losers.

Goldman Sachs maintained Buy on October 28, citing strong orders and backlog, while lowering its target to $138. The timing matters, however. Some major metering deployments are scheduled for late 2027 and 2028, leaving near-term growth dependent on faster project execution and a recovery in smaller utility purchases.