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Supply-Chain, Cost Woes to Influence Xylem's (XYL) Q3 Earnings
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Xylem Inc. (XYL - Free Report) is scheduled to release third-quarter 2021 results on Nov 2, before market open.
The company delivered better-than-expected results in the last four quarters, with an earnings surprise of 23.18%, on average. In the last reported quarter, the company’s earnings of 66 cents surpassed the Zacks Consensus Estimate of 63 cents by 4.76%.
In the past three months, shares of Xylem have gained 4.3% against the industry’s decline of 4.8%.
Image Source: Zacks Investment Research
Let us delve deeper.
Key Factors & Estimates for Q3
Xylem’s costs of sales and operating expenses increased 14.5% and 7.5%, respectively, in the second quarter of 2021. Cost inflation and strategic investments played spoilsport, having lowered earnings before interest, tax, depreciation and amortization (EBITDA) margin and earnings per share in the quarter. The same trend is expected to have continued in the third quarter.
At its analyst day, the company noted that challenging supply-chain environments, especially those related to the availability of electronic components, will be headwinds in the second half of 2021. Revenue headwinds of $100 million are predicted for the last two quarters of 2021.
Then again, Xylem’s solid product offerings, a focus on innovating products, technological expertise, and diversified end-market exposure are expected to have aided its third-quarter performance. Solid contract wins and impressive end-market conditions are likely to have been advantageous.
Healthy demand for clean water solutions, infrastructure planning, and strengthening test water businesses are anticipated to have aided the water and wastewater businesses. Also, recovering industrial activities and the industrial dewatering business in emerging markets are expected to have been tailwinds for industrial businesses. Commercial businesses are expected to have gained from the healthy replacement business. At the same time, the demand for products related to the secondary water supply is anticipated to have aided the residential business.
In August 2021, the company predicted year-over-year organic sales growth of 5-7% for the third quarter. On a segmental basis, organic sales for Water Infrastructure are expected to be up in mid-single digits, the same for Applied Water is likely to be up in high-single digits, and that for Measurement & Control Solutions is anticipated to grow low-single digits in the third quarter.
The Zacks Consensus Estimate for third-quarter revenues of $1,279 million suggests a 4.8% increase from the year-ago reported figure and a 5.3% decrease from the previous quarter’s number. Earnings estimates are pegged at 59 cents per share, suggesting a decline of 4.8% from the year-ago quarter’s reported figure and a 10.6% fall from that reported in the second quarter of 2021.
For the Water Infrastructure segment, the Zacks Consensus Estimate for revenues is pegged at $562 million, implying a 7.3% increase from the figure reported a year ago and a 1.2% decrease sequentially. Revenue estimates for Applied Water are pegged at $401 million, suggesting a 10.2% increase from the year-ago quarter’s reported figure and a decline of 3.1% from the previous quarter’s number.
Measurement & Control Solutions’ revenues are expected to be $323 million, suggesting a 2.7% decline from the year-ago reported figure and a fall of 12.2% from the previous quarter’s 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 -1.61% as the Most Accurate Estimate of 58 cents is below the Zacks Consensus Estimate of 59 cents.
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:
Image: Bigstock
Supply-Chain, Cost Woes to Influence Xylem's (XYL) Q3 Earnings
Xylem Inc. (XYL - Free Report) is scheduled to release third-quarter 2021 results on Nov 2, before market open.
The company delivered better-than-expected results in the last four quarters, with an earnings surprise of 23.18%, on average. In the last reported quarter, the company’s earnings of 66 cents surpassed the Zacks Consensus Estimate of 63 cents by 4.76%.
In the past three months, shares of Xylem have gained 4.3% against the industry’s decline of 4.8%.
Let us delve deeper.
Key Factors & Estimates for Q3
Xylem’s costs of sales and operating expenses increased 14.5% and 7.5%, respectively, in the second quarter of 2021. Cost inflation and strategic investments played spoilsport, having lowered earnings before interest, tax, depreciation and amortization (EBITDA) margin and earnings per share in the quarter. The same trend is expected to have continued in the third quarter.
At its analyst day, the company noted that challenging supply-chain environments, especially those related to the availability of electronic components, will be headwinds in the second half of 2021. Revenue headwinds of $100 million are predicted for the last two quarters of 2021.
Then again, Xylem’s solid product offerings, a focus on innovating products, technological expertise, and diversified end-market exposure are expected to have aided its third-quarter performance. Solid contract wins and impressive end-market conditions are likely to have been advantageous.
Healthy demand for clean water solutions, infrastructure planning, and strengthening test water businesses are anticipated to have aided the water and wastewater businesses. Also, recovering industrial activities and the industrial dewatering business in emerging markets are expected to have been tailwinds for industrial businesses. Commercial businesses are expected to have gained from the healthy replacement business. At the same time, the demand for products related to the secondary water supply is anticipated to have aided the residential business.
In August 2021, the company predicted year-over-year organic sales growth of 5-7% for the third quarter. On a segmental basis, organic sales for Water Infrastructure are expected to be up in mid-single digits, the same for Applied Water is likely to be up in high-single digits, and that for Measurement & Control Solutions is anticipated to grow low-single digits in the third quarter.
The Zacks Consensus Estimate for third-quarter revenues of $1,279 million suggests a 4.8% increase from the year-ago reported figure and a 5.3% decrease from the previous quarter’s number. Earnings estimates are pegged at 59 cents per share, suggesting a decline of 4.8% from the year-ago quarter’s reported figure and a 10.6% fall from that reported in the second quarter of 2021.
For the Water Infrastructure segment, the Zacks Consensus Estimate for revenues is pegged at $562 million, implying a 7.3% increase from the figure reported a year ago and a 1.2% decrease sequentially. Revenue estimates for Applied Water are pegged at $401 million, suggesting a 10.2% increase from the year-ago quarter’s reported figure and a decline of 3.1% from the previous quarter’s number.
Measurement & Control Solutions’ revenues are expected to be $323 million, suggesting a 2.7% decline from the year-ago reported figure and a fall of 12.2% from the previous quarter’s 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 -1.61% as the Most Accurate Estimate of 58 cents is below the Zacks Consensus Estimate of 59 cents.
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:
Deere & Company (DE - Free Report) currently has an Earnings ESP of +5.55% and is a Zacks #2 Ranked player. You can see the complete list of today’s Zacks #1 Rank stocks here.
Plug Power Inc. (PLUG - Free Report) presently has an Earnings ESP of +2.41% and a Zacks Rank of 3.
The Middleby Corporation (MIDD - Free Report) currently has an Earnings ESP of +1.54% and a Zacks Rank #3.