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Here's Why Investing in Xylem (XYL) Stock Makes Sense Now
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Xylem Inc. (XYL - Free Report) is poised to gain from strength in the Measurement & Control Solutions (M&CS) segment, acquired assets and shareholder-friendly moves.
Let’s delve into the factors that make this Zacks Rank #2 (Buy) company a smart investment choice at the moment.
Growth Catalysts
Business Strength: The M&CS segment is benefiting from robust demand across smart metering and other applications end markets, primarily in the United States. Growth in the transport application business, driven by backlog execution and timing of projects in Western Europe, is boosting the Water Infrastructure segment’s performance. Strong momentum in the treatment applications business, supported by increasing capital projects in emerging markets, also bodes well.
Strength in the dewatering application business is the key catalyst to the Water Solutions and Services segment’s growth. Also, growth in emerging markets due to increased volumes and favorable price realization should foster the unit’s growth.
Accretive Acquisition: XYL’s expansion initiative is expected to drive growth. The company acquired mission-critical water treatment solutions and services provider, Evoqua, in May 2023. Evoqua’s advanced water and wastewater treatment capabilities, and exposure to key industrial markets complement Xylem’s portfolio of solutions across the water cycle. The acquisition bolsters the company’s position in water technologies, solutions and services, and strengthens its foothold in lucrative end markets.
The transaction is expected to deliver run-rate cost synergies of $140 million within three years upon closing. It is also expected to strengthen the company’s balance sheet. Acquisitions contributed $480 million to total revenues in the first quarter of 2024.
Rewards to Shareholders: Xylem’s commitment to rewarding shareholders through dividends and share buybacks is encouraging. In the first three months of 2024, it paid dividends of $88 million, up 46.7% year over year. The company also bought back shares worth $15 million in the same year. In February 2024, it hiked its dividend by 9%.
Northward Estimate Revision: The Zacks Consensus Estimate for XYL’s 2024 earnings has been revised 1.9% upward in the past 60 days.
Price Performance: XYL shares have risen 35% in the past year, outperforming the industry’s 31.8% growth.
Image Source: Zacks Investment Research
Other Stocks to Consider
Some other top-ranked companies from the Industrial Products sector are discussed below.
The consensus estimate for BDC’s 2024 earnings has increased 8.3% in the past 60 days. Shares of Belden have risen 10.8% in the past year.
Applied Industrial Technologies, Inc. (AIT - Free Report) currently flaunts a Zacks Rank of 1. It has a trailing four-quarter average earnings surprise of 8.2%.
The Zacks Consensus Estimate for AIT’s fiscal 2024 earnings has improved 1.2% in the past 60 days. The stock has risen 50.6% in the past year.
Greif, Inc. (GEF - Free Report) presently carries a Zacks Rank #2. GEF delivered a trailing four-quarter earnings surprise of 150.6%, on average.
The consensus estimate for GEF’s fiscal 2024 earnings has increased 9% in the past 60 days. Its shares have risen 1.6% in the past year.
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Here's Why Investing in Xylem (XYL) Stock Makes Sense Now
Xylem Inc. (XYL - Free Report) is poised to gain from strength in the Measurement & Control Solutions (M&CS) segment, acquired assets and shareholder-friendly moves.
Let’s delve into the factors that make this Zacks Rank #2 (Buy) company a smart investment choice at the moment.
Growth Catalysts
Business Strength: The M&CS segment is benefiting from robust demand across smart metering and other applications end markets, primarily in the United States. Growth in the transport application business, driven by backlog execution and timing of projects in Western Europe, is boosting the Water Infrastructure segment’s performance. Strong momentum in the treatment applications business, supported by increasing capital projects in emerging markets, also bodes well.
Strength in the dewatering application business is the key catalyst to the Water Solutions and Services segment’s growth. Also, growth in emerging markets due to increased volumes and favorable price realization should foster the unit’s growth.
Accretive Acquisition: XYL’s expansion initiative is expected to drive growth. The company acquired mission-critical water treatment solutions and services provider, Evoqua, in May 2023. Evoqua’s advanced water and wastewater treatment capabilities, and exposure to key industrial markets complement Xylem’s portfolio of solutions across the water cycle. The acquisition bolsters the company’s position in water technologies, solutions and services, and strengthens its foothold in lucrative end markets.
The transaction is expected to deliver run-rate cost synergies of $140 million within three years upon closing. It is also expected to strengthen the company’s balance sheet. Acquisitions contributed $480 million to total revenues in the first quarter of 2024.
Rewards to Shareholders: Xylem’s commitment to rewarding shareholders through dividends and share buybacks is encouraging. In the first three months of 2024, it paid dividends of $88 million, up 46.7% year over year. The company also bought back shares worth $15 million in the same year. In February 2024, it hiked its dividend by 9%.
Northward Estimate Revision: The Zacks Consensus Estimate for XYL’s 2024 earnings has been revised 1.9% upward in the past 60 days.
Price Performance: XYL shares have risen 35% in the past year, outperforming the industry’s 31.8% growth.
Image Source: Zacks Investment Research
Other Stocks to Consider
Some other top-ranked companies from the Industrial Products sector are discussed below.
Belden Inc. (BDC - Free Report) presently sports a Zacks Rank #1 (Strong Buy) and has a trailing four-quarter earnings surprise of 14.7%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The consensus estimate for BDC’s 2024 earnings has increased 8.3% in the past 60 days. Shares of Belden have risen 10.8% in the past year.
Applied Industrial Technologies, Inc. (AIT - Free Report) currently flaunts a Zacks Rank of 1. It has a trailing four-quarter average earnings surprise of 8.2%.
The Zacks Consensus Estimate for AIT’s fiscal 2024 earnings has improved 1.2% in the past 60 days. The stock has risen 50.6% in the past year.
Greif, Inc. (GEF - Free Report) presently carries a Zacks Rank #2. GEF delivered a trailing four-quarter earnings surprise of 150.6%, on average.
The consensus estimate for GEF’s fiscal 2024 earnings has increased 9% in the past 60 days. Its shares have risen 1.6% in the past year.