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Water solutions provider Xylem Inc. (XYL - Analyst Report) is set to report fourth-quarter 2013 results before the opening bell on Feb 4. In the last reported quarter, it delivered 40.0% positive earnings surprise. Let’s see how things are shaping up for this announcement.

Factors to Consider

Xylem reported improved year-over-year results in the third quarter of 2013 with adjusted earnings per share of 49 cents, up 11% year over year. Total revenue in the quarter improved 4% year over year to $965 million. The increase in revenues was a result of improved demand in emerging markets as well as better-than-expected demand in Europe. Organically, revenues for the quarter increased 1% year over year.

In fourth-quarter 2013, Xylem gained market share through a number of product launches and several contract wins across the globe. The company has been successfully implementing its strategy to grow internationally.

Xylem anticipates revenues to be $3.8 billion in 2013 and earnings per share to be within a band of $1.60 to $1.65. GAAP earnings per share are projected to be around $1.30.

Earnings Whispers

Our proven model shows that Xylem is likely to beat earnings since it has the appropriate combination of the following 2 key ingredients:

Positive Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is +1.92%. This indicates a likely positive earnings surprise.

Zacks Rank: Xylem has a Zacks Rank #3 (Hold). This increases the predictive power of ESP. The combination of the company’s Zacks Rank and Earnings ESP assures us of a positive earnings surprise in the to-be-reported quarter.

Stocks with Zacks Ranks of #1, 2 and 3 have significantly higher chances of beating the earnings estimates. The Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement.

Other Stocks to Consider

Other stocks in the industrial goods sector that have both a positive earnings ESP and a favorable Zacks Rank are:

Gorman-Rupp Co. (GRC - Snapshot Report), Earnings ESP of +4.00% and a Zacks Rank #2 (Buy).

Ingersoll-Rand plc (IR - Analyst Report), with Earnings ESP of +6.15% and a Zacks Rank #3.

Illinois Tool Works Inc. (ITW - Analyst Report), with Earnings ESP of +1.02% and a Zacks Rank #3.

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