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Will Q2 Earnings Hold a Surprise for Xylem (XYL) Stock?

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Xylem Inc. (XYL - Free Report) is scheduled to report second-quarter 2016 results before the opening bell on Aug 2, 2016.

The company has posted an average positive earnings surprise of 1.26% in the last four quarters. Let’s see how things are shaping up prior to this announcement.

Factors to Play

After reporting robust results at the end of first three months of 2016, Xylem believes that the growing demand for water infrastructure and wastewater services would improve its revenues and margins in the upcoming quarter.

Moreover, the company’s strategic approach to project execution and the recent inorganic investments are anticipated to bear fruit in the to-be-reported quarter. The acquisition of Tideland Signal Corporation in Feb 2016 is expected to supplement the company's sales in the coastal and ocean markets. Furthermore, the company believes that the initiatives undertaken to lower operational costs would help in margin expansion going ahead.

However, we note that the company might underperform in the second quarter due to prevailing headwinds. For instance, lower investments made by energy and mining companies may hurt the demand for industrial services offered by Xylem. Also, further strengthening of U.S. currency might lower foreign revenues and earnings.

Share price of the company as of Jul 28, 2016 was $47.89 per share. We expect the release of second-quarter results to lead to stock price movement in the near term.  

XYLEM INC Price and EPS Surprise

XYLEM INC Price and EPS Surprise | XYLEM INC Quote

Earnings Whispers: Our proven model does not conclusively state that Xylem is likely to beat on earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) for this. That is not the case here as we will see below.

Zacks ESP: Xylem has an Earnings ESP of 0.00% as both the Most Accurate estimate and the Zacks Consensus Estimate stand at 47 cents.

Zacks Rank: Xylem’s carris a Zacks Rank #3. However, a 0.00% ESP makes surprise prediction difficult.

Note that we caution against Sell-rated stocks (Zacks Rank #4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Other Stocks to Consider

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

Harsco Corporation , with an Earnings ESP of +38.46% and a Zacks Rank #1.

AO Smith Corp. (AOS - Free Report) , with an Earnings ESP of +2.22% and a Zacks Rank #2.

Ball Corporation , with an Earnings ESP of +1.01% and a Zacks Rank #3.

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Xylem Inc. (XYL) - free report >>

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