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Xylem Inc. (XYL - Free Report) has been benefiting from solid momentum in its wastewater utilities business, driven by healthy demand in North America and Europe and capital projects in emerging markets. The company’s healthy industrial dewatering business globally and robust replacement business in the United States have been driving its performance. Also, the increase in demand for smart water solutions and digital offerings and strength in its test business have been proving beneficial for its clean water utilities business. For 2022, XYL’s revenues are expected to be $5.25-$5.35 billion, with organic sales growth of 4-6% on a year-over-year basis.
Xylem’s strong product offerings, its focus on innovation and efforts to boost growth are likely to be tailwinds in 2022. Also, its solid backlog level and effective pricing actions are expected to mitigate the adverse impact of cost inflation and supply-chain constraints.
It remains committed to rewarding shareholders through dividend payments and share repurchases. In the first three months of 2022, it paid out dividends worth $55 million, an increase of 7.8% from the year-ago period. Also, it repurchased shares worth $51 million. In February 2022, it hiked the quarterly dividend rate by 7%. For 2022, it anticipates paying dividends of $215 million.
However, rising costs and expenses have been a major concern for Xylem over time. In the first three months of 2022, its cost of sales, and selling, general and administrative expenses witnessed an increase of 5.1% and 1%, respectively, on a year-over-year basis. Also, research and development expenses jumped 4% year over year. For 2022, the company predicts an adjusted EBITDA margin of 16-17%, suggesting a decline from 17.1% reported in 2021.
XYL’s high-debt profile poses a concern too. Its long-term debt balance was $1,878 million, while its cash and cash equivalents were $1,117 million at the end of first-quarter 2022. For 2022, the company predicts interest/other expenses of $55 million. Further rise in debt levels can increase its financial obligations.
The company’s presence across international markets exposes it to headwinds from geopolitical issues and unfavorable movements in foreign currencies. In the first quarter, foreign currency translation had a negative impact of 2.6% on sales.
Image Source: Zacks Investment Research
In the past three months, this Zacks Rank #3 (Hold) stock has lost 4.6% compared with the industry’s decline of 8.3%.
Stocks to Consider
Some better-ranked companies from the same space are discussed below.
Applied Industrial Technologies, Inc. (AIT - Free Report) presently sports a Zacks Rank #1 (Strong Buy). The company delivered a four-quarter earnings surprise of 25.4%, on average.
Applied Industrial’s earnings estimates have been stable for fiscal 2022 (ending June 2022) in the past 30 days. Its shares have gained 0.1% in the past three months.
Roper Technologies, Inc. (ROP - Free Report) presently has a Zacks Rank #2 (Buy). Its earnings surprise in the last four quarters was 2%, on average.
In the past 30 days, Roper’s earnings estimates have been stable for 2022. ROP’s shares have lost 10.2% in the past three months.
Ferguson plc (FERG - Free Report) presently carries a Zacks Rank #2. Its earnings surprise in the last reported quarter was 11. 6%.
In the past 30 days, Ferguson’s earnings estimates have been stable for fiscal 2022 (ending July 2022). FERG’s shares have lost 27.2% in the past three months.
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Xylem (XYL) Displays Bright Prospects, Headwinds Persist
Xylem Inc. (XYL - Free Report) has been benefiting from solid momentum in its wastewater utilities business, driven by healthy demand in North America and Europe and capital projects in emerging markets. The company’s healthy industrial dewatering business globally and robust replacement business in the United States have been driving its performance. Also, the increase in demand for smart water solutions and digital offerings and strength in its test business have been proving beneficial for its clean water utilities business. For 2022, XYL’s revenues are expected to be $5.25-$5.35 billion, with organic sales growth of 4-6% on a year-over-year basis.
Xylem’s strong product offerings, its focus on innovation and efforts to boost growth are likely to be tailwinds in 2022. Also, its solid backlog level and effective pricing actions are expected to mitigate the adverse impact of cost inflation and supply-chain constraints.
It remains committed to rewarding shareholders through dividend payments and share repurchases. In the first three months of 2022, it paid out dividends worth $55 million, an increase of 7.8% from the year-ago period. Also, it repurchased shares worth $51 million. In February 2022, it hiked the quarterly dividend rate by 7%. For 2022, it anticipates paying dividends of $215 million.
However, rising costs and expenses have been a major concern for Xylem over time. In the first three months of 2022, its cost of sales, and selling, general and administrative expenses witnessed an increase of 5.1% and 1%, respectively, on a year-over-year basis. Also, research and development expenses jumped 4% year over year. For 2022, the company predicts an adjusted EBITDA margin of 16-17%, suggesting a decline from 17.1% reported in 2021.
XYL’s high-debt profile poses a concern too. Its long-term debt balance was $1,878 million, while its cash and cash equivalents were $1,117 million at the end of first-quarter 2022. For 2022, the company predicts interest/other expenses of $55 million. Further rise in debt levels can increase its financial obligations.
The company’s presence across international markets exposes it to headwinds from geopolitical issues and unfavorable movements in foreign currencies. In the first quarter, foreign currency translation had a negative impact of 2.6% on sales.
Image Source: Zacks Investment Research
In the past three months, this Zacks Rank #3 (Hold) stock has lost 4.6% compared with the industry’s decline of 8.3%.
Stocks to Consider
Some better-ranked companies from the same space are discussed below.
Applied Industrial Technologies, Inc. (AIT - Free Report) presently sports a Zacks Rank #1 (Strong Buy). The company delivered a four-quarter earnings surprise of 25.4%, on average.
You can see the complete list of today’s Zacks #1 Rank stocks here.
Applied Industrial’s earnings estimates have been stable for fiscal 2022 (ending June 2022) in the past 30 days. Its shares have gained 0.1% in the past three months.
Roper Technologies, Inc. (ROP - Free Report) presently has a Zacks Rank #2 (Buy). Its earnings surprise in the last four quarters was 2%, on average.
In the past 30 days, Roper’s earnings estimates have been stable for 2022. ROP’s shares have lost 10.2% in the past three months.
Ferguson plc (FERG - Free Report) presently carries a Zacks Rank #2. Its earnings surprise in the last reported quarter was 11. 6%.
In the past 30 days, Ferguson’s earnings estimates have been stable for fiscal 2022 (ending July 2022). FERG’s shares have lost 27.2% in the past three months.