Xylem Inc. (XYL - Free Report) has been benefiting from improving supply chains and strong demand in the test and measurement market. Growth in the utilities and industrial end markets is boosting the Water Infrastructure segment’s performance. Also, strength in both the building solutions and industrial end markets is a key catalyst for the Applied Water segment’s growth. Robust momentum across the utilities and industrial water applications end markets augurs well for XYL.
The company believes in acquiring businesses to expand its product offerings. For instance, in May 2023, the company acquired mission-critical water treatment solutions and services provider Evoqua. Evoqua’s advanced water and wastewater treatment capabilities and exposure to key industrial markets complement Xylem’s portfolio of solutions across the water cycle. It expects the buyout to deliver run-rate cost synergies of $140 million within three years of closing.
The company remains focused on rewarding its shareholders through dividend payouts and share buybacks. In the first three quarters of 2023, Xylem paid dividends of $219 million, reflecting an increase of 34.4% year over year. It also repurchased shares worth $10 million in the same period.
In the past three months, the Zacks Rank #3 (Hold) company has gained 22.8% compared with the industry’s 15.5% growth.
However, weakness in the residential building solutions market has been affecting the performance of its Applied Water segment. Orders declined by 3.2% for the segment in the first nine months of 2023. For the fourth quarter of 2023, Xylem expects the Applied Water segment’s total revenues to remain flat on a year-over-year basis.
The company has been grappling with rising operating costs and expenses. In the first nine months of 2023, its cost of revenues increased 31.1% year over year, while selling, general and administrative expenses rose 41.6%. High raw material, labor, freight and overhead costs are pushing up the costs of sales. Escalating costs pose a threat to the company’s bottom line.
Key Picks
We have highlighted three better-ranked stocks from the same space, namely Crane Company (CR - Free Report) , Flowserve Corporation (FLS - Free Report) and Parker-Hannifin Corporation (PH - Free Report) , each currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Crane delivered a trailing four-quarter average earnings surprise of 29.8%. In the past 60 days, the Zacks Consensus Estimate for CR’s 2023 earnings has been unchanged. The stock has rallied 35% in the past three months.
Flowserve has a trailing four-quarter average earnings surprise of 27.3%. The consensus estimate for FLS’ 2023 earnings has remained stable in the past 60 days. Shares of the company have gained 6.1% in the past three months.
Parker-Hannifin delivered a trailing four-quarter average earnings surprise of 11.8%. In the past 60 days, the consensus estimate for PH’s fiscal 2024 earnings has improved by 0.4%. The stock has risen 21.6% in the past three months.
Research Chief Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
This company targets millennial and Gen Z audiences, generating nearly $1 billion in revenue last quarter alone. A recent pullback makes now an ideal time to jump aboard. Of course, all our elite picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Nano-X Imaging which shot up +129.6% in little more than 9 months.
Free: See Our Top Stock And 4 Runners Up
Xylem Inc. (XYL - Free Report) has been benefiting from improving supply chains and strong demand in the test and measurement market. Growth in the utilities and industrial end markets is boosting the Water Infrastructure segment’s performance. Also, strength in both the building solutions and industrial end markets is a key catalyst for the Applied Water segment’s growth. Robust momentum across the utilities and industrial water applications end markets augurs well for XYL.
The company believes in acquiring businesses to expand its product offerings. For instance, in May 2023, the company acquired mission-critical water treatment solutions and services provider Evoqua. Evoqua’s advanced water and wastewater treatment capabilities and exposure to key industrial markets complement Xylem’s portfolio of solutions across the water cycle. It expects the buyout to deliver run-rate cost synergies of $140 million within three years of closing.
The company remains focused on rewarding its shareholders through dividend payouts and share buybacks. In the first three quarters of 2023, Xylem paid dividends of $219 million, reflecting an increase of 34.4% year over year. It also repurchased shares worth $10 million in the same period.
In the past three months, the Zacks Rank #3 (Hold) company has gained 22.8% compared with the industry’s 15.5% growth.
However, weakness in the residential building solutions market has been affecting the performance of its Applied Water segment. Orders declined by 3.2% for the segment in the first nine months of 2023. For the fourth quarter of 2023, Xylem expects the Applied Water segment’s total revenues to remain flat on a year-over-year basis.
The company has been grappling with rising operating costs and expenses. In the first nine months of 2023, its cost of revenues increased 31.1% year over year, while selling, general and administrative expenses rose 41.6%. High raw material, labor, freight and overhead costs are pushing up the costs of sales. Escalating costs pose a threat to the company’s bottom line.
Key Picks
We have highlighted three better-ranked stocks from the same space, namely Crane Company (CR - Free Report) , Flowserve Corporation (FLS - Free Report) and Parker-Hannifin Corporation (PH - Free Report) , each currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Crane delivered a trailing four-quarter average earnings surprise of 29.8%. In the past 60 days, the Zacks Consensus Estimate for CR’s 2023 earnings has been unchanged. The stock has rallied 35% in the past three months.
Flowserve has a trailing four-quarter average earnings surprise of 27.3%. The consensus estimate for FLS’ 2023 earnings has remained stable in the past 60 days. Shares of the company have gained 6.1% in the past three months.
Parker-Hannifin delivered a trailing four-quarter average earnings surprise of 11.8%. In the past 60 days, the consensus estimate for PH’s fiscal 2024 earnings has improved by 0.4%. The stock has risen 21.6% in the past three months.
Research Chief Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
This company targets millennial and Gen Z audiences, generating nearly $1 billion in revenue last quarter alone. A recent pullback makes now an ideal time to jump aboard. Of course, all our elite picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Nano-X Imaging which shot up +129.6% in little more than 9 months.
Free: See Our Top Stock And 4 Runners Up
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