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Xylem (XYL) Upgraded to Buy on Positive Long-Run Outlook
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On Apr 4, Zacks Investment Research upgraded Xylem Inc. (XYL - Free Report) to a Zacks Rank #2 (Buy) from a Zacks Rank #3 (Hold). Going by the Zacks model, companies with a Zacks Rank #2 are likely to perform better than the broader market, over the next few quarters.
Reason behind the Upside
We believe that Xylem’s stock is a promising investment bet at the moment. Over the last one month, shares of this Zacks Rank #2 (Buy) stock yielded a return of 3.34%, outperforming the loss of 0.20% incurred by the Zacks categorized Machinery-General Industrial industry.
Notably, the stock’s projected earnings growth rate for this year is 12.40%, higher than the Machinery-General Industrial industry’s projected growth rate of 10.40%. Also, the stock’s projected earnings and revenue growth rate for 2018 (F2/F1) are currently pegged at 14.30% and 3.82%, respectively.
Xylem anticipates generating revenues within the range of $4.5–$4.6 billion for full-year 2017, estimating 1–3% of organic growth and 20-22% higher than the aggregate revenue recorded for full-year 2016. The company estimates to accrue earnings within the range of $2.20–$2.35 per share for full-year 2017, higher than $2.03 per share reported at the end of 2016.
The company lately (on Apr 4, 2017) raised the 2020 financial goals and reaffirmed its existing strategy to mirror accelerated growth on the back of acquisitions.
In Oct 2016, Xylem completed the acquisition of Sensus and Visenti. These strategic buyouts are expected to fortify the company’s growing public utility business, as well as boost its revenues and profitability in the quarters ahead. The Sensus acquisition is reinforcing the company’s smart infrastructure portfolio and increasing its exposure to the rapidly growing end markets.
Driden by these benefits as well as those from the ongoing productivity initiatives, the company anticipates generating organic revenue growth rate within the range of 4–6% by 2020, higher than the previous guidance of 3–5% noted in 2015. In addition, operating margin is expected to lie in the band of 400–500 bps by 2020, 100 bps wider than the previously projected target of 300–400 bps.
Xylem also intends to improve its business on increased volumes, greater cost discipline and sound initiatives for operational enhancement. In addition, the company’s $35-million Middle East and North African (MENA) region investment plan (made in Oct 2016) is likely to drive revenues and margins over the upcoming quarters.
Other Stocks to Consider
Other well-ranked stocks within the industry are listed below:
Altra Industrial Motion Corp. carries a Zacks Rank #2 and has an average earnings surprise of 12.49% for the trailing quarters.
Alarm.Com Holdings, Inc. (ALRM - Free Report) also holds a Zacks Rank #2 and has an average earnings surprise of 40.56% for the past four quarters.
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Xylem (XYL) Upgraded to Buy on Positive Long-Run Outlook
On Apr 4, Zacks Investment Research upgraded Xylem Inc. (XYL - Free Report) to a Zacks Rank #2 (Buy) from a Zacks Rank #3 (Hold). Going by the Zacks model, companies with a Zacks Rank #2 are likely to perform better than the broader market, over the next few quarters.
Reason behind the Upside
We believe that Xylem’s stock is a promising investment bet at the moment. Over the last one month, shares of this Zacks Rank #2 (Buy) stock yielded a return of 3.34%, outperforming the loss of 0.20% incurred by the Zacks categorized Machinery-General Industrial industry.
Notably, the stock’s projected earnings growth rate for this year is 12.40%, higher than the Machinery-General Industrial industry’s projected growth rate of 10.40%. Also, the stock’s projected earnings and revenue growth rate for 2018 (F2/F1) are currently pegged at 14.30% and 3.82%, respectively.
Xylem anticipates generating revenues within the range of $4.5–$4.6 billion for full-year 2017, estimating 1–3% of organic growth and 20-22% higher than the aggregate revenue recorded for full-year 2016. The company estimates to accrue earnings within the range of $2.20–$2.35 per share for full-year 2017, higher than $2.03 per share reported at the end of 2016.
The company lately (on Apr 4, 2017) raised the 2020 financial goals and reaffirmed its existing strategy to mirror accelerated growth on the back of acquisitions.
In Oct 2016, Xylem completed the acquisition of Sensus and Visenti. These strategic buyouts are expected to fortify the company’s growing public utility business, as well as boost its revenues and profitability in the quarters ahead. The Sensus acquisition is reinforcing the company’s smart infrastructure portfolio and increasing its exposure to the rapidly growing end markets.
Driden by these benefits as well as those from the ongoing productivity initiatives, the company anticipates generating organic revenue growth rate within the range of 4–6% by 2020, higher than the previous guidance of 3–5% noted in 2015. In addition, operating margin is expected to lie in the band of 400–500 bps by 2020, 100 bps wider than the previously projected target of 300–400 bps.
Xylem also intends to improve its business on increased volumes, greater cost discipline and sound initiatives for operational enhancement. In addition, the company’s $35-million Middle East and North African (MENA) region investment plan (made in Oct 2016) is likely to drive revenues and margins over the upcoming quarters.
Other Stocks to Consider
Other well-ranked stocks within the industry are listed below:
ACCO Brands Corporation (ACCO - Free Report) has an average earnings surprise of 24.74% for the last four quarters and currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Altra Industrial Motion Corp. carries a Zacks Rank #2 and has an average earnings surprise of 12.49% for the trailing quarters.
Alarm.Com Holdings, Inc. (ALRM - Free Report) also holds a Zacks Rank #2 and has an average earnings surprise of 40.56% for the past four quarters.
Zacks’ Best Private Investment Ideas
In addition to the recommendations that are available to the public on our website, how would you like to follow all Zacks' private buys and sells in real time?
Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Starting today, for the next month, you can have unrestricted access. Click here for Zacks' private trades >>