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Will High Demand & Supply Woes Impact Xylem's (XYL) Q4 Earnings?

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

The water solutions provider reported better-than-expected results in the last four quarters, the earnings surprise being 20.07%, on average. In the last reported quarter, the company’s earnings of 63 cents surpassed the Zacks Consensus Estimate of 59 cents by 6.78%.

In the past three months, shares of Xylem have lost 18.6% compared with the industry’s decline of 5.6%.

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Key Factors & Estimates for Q4

Robust demand for water solutions, new contract wins and solid backlog levels are expected to have supported fourth-quarter results. Businesses in water and wastewater utilities are predicted to have gained from strengthening test business, infrastructure planning and growth opportunities in emerging markets, Europe and North America. Recovering industrial activities and the industrial dewatering business in emerging markets are expected to have been tailwinds for industrial businesses.

Commercial business might have benefited from strength in the U.S. replacement business and healthy growth in Europe. The residential business is likely to reflect benefits from healthy demand in Europe, the United States and China. Xylem's solid product line-up, technological expertise and operational execution are expected to have aided performance in the fourth quarter.

On the flip side, the restricted supply of materials, especially electronic components and chips, might have adversely impacted Xylem’s performance in the fourth quarter. Logistics issues and inflation in material, freight and wage costs are expected to have influenced the company’s margins. Strategic investments and divestitures might have impacted the performance. The company’s earnings before interest, tax, depreciation and amortization (EBITDA) margin and earnings per share were lowered by 140 basis points and 10 cents per share, respectively, in the third quarter.

Xylem predicts organic sales to decline 4-6% year over year in the fourth quarter of 2021. On a segmental basis, organic sales are predicted to fall in the high teens for Measurement & Control Solutions, while are expected to be flat (year over year) for Applied Water and Water Infrastructure. It anticipates adjusted earnings of 55-65 cents per share for the fourth quarter. This projection compares unfavorably with 81 cents in the year-ago quarter.

The Zacks Consensus Estimate for Xylem’s fourth-quarter revenues of $1,307 million suggests a 4.8% decrease from the year-ago reported figure and a 3.3% increase from the previous quarter’s number. Earnings estimates are pegged at 62 cents per share, suggesting a decline of 23.5% from the year-ago quarter’s reported figure and a 1.6% fall from that reported in the third quarter of 2021.

For the Water Infrastructure segment, the Zacks Consensus Estimate for revenues is pegged at $615 million, implying a 0.2% decrease from the figure reported a year ago and a 12.4% increase sequentially. Revenue estimates for Applied Water are pegged at $398 million, suggesting a 0.8% increase from the year-ago quarter’s reported figure and a decline of 0.5% from the previous quarter’s number. Measurement & Control Solutions’ revenues are expected to be $298 million, suggesting a 17.7% decline from the year-ago reported figure and a fall of 6.3% 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. This 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 -4.40% as the Most Accurate Estimate of 59 cents is below the Zacks Consensus Estimate of 62 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 #3.

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.

Sealed Air Corporation (SEE - Free Report) currently has an Earnings ESP of +1.75% and is a Zacks #2 Ranked player. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Sealed Air’s earnings is pegged at $1.14 per share for the fourth quarter of 2021. The company reported better-than-expected results in three of the last four quarters, while lagging estimates once. The average earnings surprise for SEE is 6.54%.

AGCO Corporation (AGCO - Free Report) presently has an Earnings ESP of +13.66% and a Zacks Rank of 2.

For the fourth quarter of 2021, the Zacks Consensus Estimate for AGCO’s earnings has been decreased by 0.6% to $1.72 in the past 60 days. The company reported better-than-expected results in the last four quarters, with the earnings surprise being 47.53%, on average.

Chart Industries, Inc. (GTLS - Free Report) currently has an Earnings ESP of +1.74% and a Zacks Rank #3.

The Zacks Consensus Estimate for Chart Industries’ earnings for the fourth quarter has been decreased by 18.3% to 67 cents in the past 60 days. GTLS reported better-than-expected results in two of the last four quarters, while lagging estimates twice. The earnings surprise was 15.36%, on average.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.