Shares of Xylem (XYL - Free Report) have gained nearly 13% in the past six months, outperforming the industry’s 0.5% increase in the period.
Catalysts Behind the Price Surge
Strength across Xylem’s operations owing to strong backlogs and underlying demand has been driving the stock higher. Substantial increase in orders (up 6% organically in the second quarter) due to strong underlying demand, supported by large infrastructure projects in the United States and Canada, bode well for the company. Due to the essential nature of the business, demand remains robust. Pricing actions to mitigate cost inflation are supporting the bottom line.
Solid global demand across end markets is supporting Xylem’s growth, thus boosting the stock’s performance. The Water Infrastructure segment is benefiting from effective price realization and healthy activity in wastewater utility business in the United States and Western Europe. For 2022, the company expects high single-digit growth in Water Infrastructure. The Applied Water segment is gaining from strong price realization and backlog execution in industrial and residential end markets. The company expects low double-digit growth in Applied Water.
Xylem’s commitment to reward shareholders through dividends and share buybacks is also boosting its shares. In the first half of 2022, Xylem paid out dividends worth $110 million, reflecting an increase of 7.8% year over year. The company also bought back shares worth $52 million in the same period. In February, the company hiked its dividend by 7%.
Will the Rally Continue?
Continued increase in manufacturing activities and gradual easing of supply chain constraints should aid Xylem’s performance going forward. Pricing actions to mitigate cost inflation are expected to support its top-line growth.
Owing to strong demand, price realization and gradual easing of supply-chain constraints, XYL raised its adjusted earnings per share guidance for the full year. It now expects the metric to be in the range of $2.50 to $2.70 compared with $2.40 to $2.70 anticipated earlier. The company expects full-year revenues to increase 3-5% on a reported basis and 8-10% on an organic basis.
The optimism surrounding the stock is evident from the Zacks Consensus Estimate for 2022 earnings being revised upward by 3.2% in the past 90 days.
Zacks Rank & Key Picks
Xylem carries a Zacks Rank #3 (Hold).
Some better-ranked stocks within the broader Industrial Products sector are as follows:
Lindsay Corporation (LNN - Free Report) sports a Zacks Rank #1 (Strong Buy). LNN pulled a trailing four-quarter earnings surprise of 25.6%, on average. You can see the complete list of today’s Zacks #1 Rank stocks.
Lindsay Corporation has an estimated earnings growth rate of 44.1% for the current year. Shares of the company have rallied 24% in the past six months.
Greif, Inc. (GEF - Free Report) presently carries a Zacks Rank #2 (Buy). GEF delivered a trailing four-quarter earnings surprise of 22.9%, on average.
Greif has an estimated earnings growth rate of 36.8% for the current year. Shares of the company have gained 19.3% in the past six months.
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Shares of Xylem (XYL - Free Report) have gained nearly 13% in the past six months, outperforming the industry’s 0.5% increase in the period.
Catalysts Behind the Price Surge
Strength across Xylem’s operations owing to strong backlogs and underlying demand has been driving the stock higher. Substantial increase in orders (up 6% organically in the second quarter) due to strong underlying demand, supported by large infrastructure projects in the United States and Canada, bode well for the company. Due to the essential nature of the business, demand remains robust. Pricing actions to mitigate cost inflation are supporting the bottom line.
Solid global demand across end markets is supporting Xylem’s growth, thus boosting the stock’s performance. The Water Infrastructure segment is benefiting from effective price realization and healthy activity in wastewater utility business in the United States and Western Europe. For 2022, the company expects high single-digit growth in Water Infrastructure. The Applied Water segment is gaining from strong price realization and backlog execution in industrial and residential end markets. The company expects low double-digit growth in Applied Water.
Xylem’s commitment to reward shareholders through dividends and share buybacks is also boosting its shares. In the first half of 2022, Xylem paid out dividends worth $110 million, reflecting an increase of 7.8% year over year. The company also bought back shares worth $52 million in the same period. In February, the company hiked its dividend by 7%.
Will the Rally Continue?
Continued increase in manufacturing activities and gradual easing of supply chain constraints should aid Xylem’s performance going forward. Pricing actions to mitigate cost inflation are expected to support its top-line growth.
Owing to strong demand, price realization and gradual easing of supply-chain constraints, XYL raised its adjusted earnings per share guidance for the full year. It now expects the metric to be in the range of $2.50 to $2.70 compared with $2.40 to $2.70 anticipated earlier. The company expects full-year revenues to increase 3-5% on a reported basis and 8-10% on an organic basis.
The optimism surrounding the stock is evident from the Zacks Consensus Estimate for 2022 earnings being revised upward by 3.2% in the past 90 days.
Zacks Rank & Key Picks
Xylem carries a Zacks Rank #3 (Hold).
Some better-ranked stocks within the broader Industrial Products sector are as follows:
Lindsay Corporation (LNN - Free Report) sports a Zacks Rank #1 (Strong Buy). LNN pulled a trailing four-quarter earnings surprise of 25.6%, on average. You can see the complete list of today’s Zacks #1 Rank stocks.
Lindsay Corporation has an estimated earnings growth rate of 44.1% for the current year. Shares of the company have rallied 24% in the past six months.
Greif, Inc. (GEF - Free Report) presently carries a Zacks Rank #2 (Buy). GEF delivered a trailing four-quarter earnings surprise of 22.9%, on average.
Greif has an estimated earnings growth rate of 36.8% for the current year. Shares of the company have gained 19.3% in the past six months.
4 Oil Stocks with Massive Upsides
Global demand for oil is through the roof... and oil producers are struggling to keep up. So even though oil prices are well off their recent highs, you can expect big profits from the companies that supply the world with "black gold."
Zacks Investment Research has just released an urgent special report to help you bank on this trend.
In Oil Market on Fire, you'll discover 4 unexpected oil and gas stocks positioned for big gains in the coming weeks and months. You don't want to miss these recommendations.
Download your free report now to see them.
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