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Analyst Blog

Xylem Inc. (XYL - Analyst Report), one of the leading providers of innovative solutions for global water challenges, recently announced the approval of a new share buyback program that will enable the company to reward its shareholders well.

The approval gives Xylem the authorization to repurchase up to $250 million worth shares from the open market in a three year time-period. Along with this, the company also declared to pay a quarterly dividend of $0.1164 per share on Sep 18, 2013 to shareholders of record on Sep 4, 2013.

This announcement will likely raise investors’ confidence in the stock. Xylem follows a consistent policy of rewarding its shareholders with dividend payments garnished with occasional increases and share buyback programs. These also points toward the company’s healthy balance sheet and strong cash position.

A look into Xylem’s second quarter 2013 financial results (announced on Jul 30, 2013) clearly shows the compliance with this capital deployment policy. During the quarter, shares worth $18 million were repurchased while approximately $43 million were paid as dividend.

Talking of Xylem’s cash position, cash and cash equivalents exiting the quarter were $360 million while roughly $42 million were generated from operating activities.     

The Zacks Consensus Estimate for Xylem currently stands at 38 cents for the third quarter 2013, reflecting a decline of 13.6% year over year. Earnings Estimate for 2013 and 2014 are at $1.43 and $1.75, down 19.2% and up 22.6%, respectively.

Xylem Inc. is based in White Plains, New York and operates in more than 150 countries worldwide. The company currently has a $4.5 billion market capitalization and carries a Zacks Rank #5 (Strong Sell).

Other stocks to watch out for in the industry are Gorman-Rupp Co. (GRC - Snapshot Report) and Graham Corp. (GHM - Snapshot Report), each with a Zacks Rank #1 (Strong Buy) while The Middleby Corp. (MIDD - Analyst Report) carries a Zacks Rank #2 (Buy).

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