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Xylem (XYL) to Report Q2 Earnings: Is a Beat in the Cards?

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Xylem Inc. (XYL - Free Report) is scheduled to release second-quarter 2021 results on Aug 3, before market open.

The water solutions provider reported better-than-expected results in each of the trailing four quarters. Earnings surprise was 22.63%, on average. In the last reported quarter, the company’s earnings of 56 cents surpassed the Zacks Consensus Estimate of 37 cents.

Zacks Investment Research
Image Source: Zacks Investment Research

In the past three months, shares of Xylem have gained 12.1% against the industry’s decline of 3.7%.

Key Factors at Play

Xylem is expected to have benefited from the improving residential market as well as strong recovery in the industrial and commercial markets in the second quarter. Healthy contract wins, strengthening test business in Europe and emerging markets, along with rising demand for water solution, are likely to have supplemented its clean water utilities business’ performance in the quarter. Strength across the company’s wastewater utilities business in North America and Europe, driven by healthy demand environment is also expected to have augmented its top line.

For second-quarter 2021, the company expects year-over-year organic revenue growth of 8-10%. Coming to the segments, the company anticipates its Water Infrastructure’s organic sales to grow in high-single digits, whereas that for Applied Water Systems is expected to increase in the low-teen range. It expects organic sales for the Measurement & Control Solutions segment to improve in mid-single digits in the quarter under review.

Xylem’s strong backlog level, product innovation measures, along with its efforts to boost growth, are likely to have been beneficial in the second quarter. Also, its focus on operational execution is likely to have helped it maintain a solid margin performance in the second quarter. Despite cost control measures, the company is exposed to woes arising from cost inflation and investments. These headwinds might have adversely impacted the company’s margins in the to-be-reported quarter.

For the Water Infrastructure segment, the Zacks Consensus Estimate for revenues is pegged at $565 million, implying a 29% increase from the figure reported a year ago and an 11% increase sequentially. Revenue estimates for Applied Water are pegged at $397 million, suggesting a 17.5% increase from the year-ago quarter’s reported figure and a rise of 1% from the previous quarter’s reported number. Measurement & Control Solutions’ revenues are expected to be $346 million, relatively flat year over year but down 2.3% sequentially.

The Zacks Consensus Estimate for second-quarter revenues of $1,313 million suggests a 13.2% increase from the year-ago reported figure and a 4.5% increase from the previous quarter’s reported number. Earnings estimates are pegged at 63 cents per share, suggesting a surge of 57.5% from the year-ago quarter’s reported figure and a 12.5% rise from that reported in the first quarter.

Earnings Whispers

According to our quantitative model, a stock needs to have the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold) to increase the odds of an earnings beat.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

This is the case here as given below:

Earnings ESP: Xylem has an Earnings ESP of +0.30%.

Xylem Inc. Price and EPS Surprise

Xylem Inc. Price and EPS Surprise

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

Zacks Rank: The company carries a Zacks Rank #3.

Other Key Picks

Here are some other companies that you may want to consider as our model shows that these too have the right combination of elements to post an earnings beat this quarter:

Eaton Corporation plc (ETN - Free Report) has an Earnings ESP of +2.17% and Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Deere & Company (DE - Free Report) has an Earnings ESP of +11.97% and it currently carries a Zacks Rank #2 at present.

Johnson Controls International plc (JCI - Free Report) has an Earnings ESP of +0.75% and a Zacks Rank of 3.

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