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Xylem (XYL) to Report Q1 Earnings: What's in the Offing?

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Xylem Inc. (XYL - Free Report) is scheduled to release first-quarter 2021 results on May 4, before market open.

The water solutions provider delivered better-than-expected results in three of the trailing four quarters, while lagging estimates once. Earnings surprise was a positive 0.34%, on average. In the last reported quarter, the company’s earnings of 81 cents surpassed the Zacks Consensus Estimate of 69 cents.

In the past six months, shares of Xylem gained 27.8% compared with the industry’s growth of 25.7%.




 

Let us delve deeper.

Key Factors & Estimates for Q1

The pandemic-led uncertainties and weakness in the Measurement & Control Solutions segment affected Xylem’s performance in fourth-quarter 2020. Notably, the company’s organic sales declined 2% year over year in the fourth quarter of 2020, while that for the Measurement & Control Solutions segment decreased 5% from the year-ago quarter. The persistence of the trend is expected to have affected the company’s top-line performance in the first quarter of 2021.

In addition, solid contract wins, product offerings and diversified end-market exposure are anticipated to have aided the performance in the quarter.

For first-quarter 2021, Xylem expects year-over-year organic revenue growth of 1-3%. Coming to the segments, Water Infrastructure’s organic sales are anticipated to grow in low- to mid-single digits, whereas that for Applied Water is expected to increase in low-single digits. However, organic sales for the Measurement & Control Solutions segment are anticipated to have declined in low to mid-single digits in the quarter under review.

Though efforts have been strong to keep costs under control, Xylem is exposed to woes arising from cost inflation and investments. The headwinds have been adversely impacting the company’s margins for the past few quarters. Notably, cost inflation reduced the fourth-quarter operating margin by 120 basis points (bps), whereas investments lowered the same by 60 bps. However, healthy liquidity and shareholder-friendly policies are expected to have been tailwinds.

The Zacks Consensus Estimate for first-quarter revenues of $1,173 million suggests a 4.5% increase from the year-ago reported figure and a 14.6% decrease from the previous quarter’s reported number. Earnings estimates are pegged at 37 cents per share, suggesting a surge of 60.9% from the year-ago quarter’s reported figure and a 54.3% fall from that reported in the fourth quarter of 2020.

For the Water Infrastructure segment, the Zacks Consensus Estimate for revenues is pegged at $479 million, implying a 9.4% increase from the figure reported a year ago and a 22.2% decrease sequentially. Revenue estimates for Applied Water are pegged at $361 million, suggesting a 6.8% increase from the year-ago quarter’s reported figure and a decline of 8.6% from the previous quarter’s reported number.

Also, Measurement & Control Solutions’ revenues are expected to be $343 million, suggesting a 1.2% decline from the year-ago reported figure and a fall of 5.2% from the previous quarter’s reported number.

Earnings Whispers

Our proven model does not conclusively suggest an earnings beat for Xylem this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of beating estimates. That is not the case with Xylem as shown below. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Xylem has an Earnings ESP of -3.68% as the Most Accurate Estimate of 36 cents is below the Zacks Consensus Estimate of 37 cents.

Xylem Inc. Price, Consensus and EPS Surprise

 

Xylem Inc. Price, Consensus and EPS Surprise

Xylem Inc. price-consensus-eps-surprise-chart | Xylem Inc. Quote

Zacks Rank: Xylem currently carries a Zacks Rank #4 (Sell).

Stocks to Consider

Here are some companies that you may want to consider as according to our model, these have the right combination of elements to beat on earnings this reporting cycle:

The Middleby Corporation (MIDD - Free Report) currently has an Earnings ESP of +0.39% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Emerson Electric Co. (EMR - Free Report) currently has an Earnings ESP of +3.62% and is a Zacks #3 Ranked player.

Alarm.com Holdings, Inc. (ALRM - Free Report) presently has an Earnings ESP of +3.63% and a Zacks Rank of 3.

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