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On Dec 5, 2016, we issued an updated research report on diversified machinery company, Xylem Inc. (XYL - Free Report) .
Post third-quarter 2016 earnings release (Nov 1, 2016), Xylem’s shares have returned 9.60% on average, outperforming 3.39% returns by the S&P 500. However, this Zacks Rank #3 (Hold) stock underperformed the Zacks categorized Machinery-General Industrial industry that has an average return of 12.99% during the comparable period.
Existing Scenario
Xylem’s public utility sector’s business has been gaining strength over time. This improvement is largely attributable to the rise in demand for its wastewater and water infrastructure services, especially in the U.S. Moreover, the latest acquisitions made by the company are expected to boost revenues and earnings in the near term. Xylem also anticipates reinforcing its financial fundamentals in the upcoming quarters on the back of increased backlogs, volumes, greater cost discipline and strategic initiatives for operational efficiency. Based on these positives, Xylem has raised its 2016 revenue guidance to $3.8 billion from $3.7 billion, with an estimated year-over-year organic sales growth of 1–1.5%. Over the last 30 days, the Zacks Consensus Estimate for the stock remained unchanged for 2016, but moved north for 2017.
However, the above mentioned bullish aspects might be partially offset by certain headwinds prevailing in the market. For instance, Xylem is exposed to several political, environmental, economic and legal headwinds. In addition, the company’s operating margin is highly sensitive to persistent price fluctuations of major inputs like nickel, copper, aluminum, plastics, seals, bearings, motors and fabricated parts. Also, extensive business rivalry within the industry exposes it to risks of market share loss. Even so, weakness in the energy and mining market has been adversely affecting sales of industrial product producing companies like Xylem.
Stocks to Consider
Some better-ranked stocks from the same space are ACCO Brands Corporation (ACCO - Free Report) , Applied Industrial Technologies, Inc. (AIT - Free Report) and Alarm.Com Holdings, Inc. (ALRM - Free Report) .
ACCO Brands Corporation posted an average positive earnings surprise of 23.93% over the four trailing quarters. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Applied Industrial Technologies currently carries a Zacks Rank #2 (Buy). It posted an average positive earnings surprise of 4.93% over the last four quarters.
Alarm.Com Holdings currently carries a Zacks Rank #2. The company delivered an average positive earnings surprise of 165.56% over the trailing four quarters.
Zacks' Top Investment Ideas for Long-Term Profit
How would you like to see our best recommendations to help you find today’s most promising long-term stocks? Starting now, you can look inside our portfolios featuring stocks under $10, income stocks, value investments and more. These picks, which have double and triple-digit profit potential, are rarely available to the public. But you can see them now.Click here >>
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Xylem (XYL) Growth Prospects Bright Amid Macro Headwinds
On Dec 5, 2016, we issued an updated research report on diversified machinery company, Xylem Inc. (XYL - Free Report) .
Post third-quarter 2016 earnings release (Nov 1, 2016), Xylem’s shares have returned 9.60% on average, outperforming 3.39% returns by the S&P 500. However, this Zacks Rank #3 (Hold) stock underperformed the Zacks categorized Machinery-General Industrial industry that has an average return of 12.99% during the comparable period.
Existing Scenario
Xylem’s public utility sector’s business has been gaining strength over time. This improvement is largely attributable to the rise in demand for its wastewater and water infrastructure services, especially in the U.S. Moreover, the latest acquisitions made by the company are expected to boost revenues and earnings in the near term. Xylem also anticipates reinforcing its financial fundamentals in the upcoming quarters on the back of increased backlogs, volumes, greater cost discipline and strategic initiatives for operational efficiency. Based on these positives, Xylem has raised its 2016 revenue guidance to $3.8 billion from $3.7 billion, with an estimated year-over-year organic sales growth of 1–1.5%. Over the last 30 days, the Zacks Consensus Estimate for the stock remained unchanged for 2016, but moved north for 2017.
However, the above mentioned bullish aspects might be partially offset by certain headwinds prevailing in the market. For instance, Xylem is exposed to several political, environmental, economic and legal headwinds. In addition, the company’s operating margin is highly sensitive to persistent price fluctuations of major inputs like nickel, copper, aluminum, plastics, seals, bearings, motors and fabricated parts. Also, extensive business rivalry within the industry exposes it to risks of market share loss. Even so, weakness in the energy and mining market has been adversely affecting sales of industrial product producing companies like Xylem.
Stocks to Consider
Some better-ranked stocks from the same space are ACCO Brands Corporation (ACCO - Free Report) , Applied Industrial Technologies, Inc. (AIT - Free Report) and Alarm.Com Holdings, Inc. (ALRM - Free Report) .
ACCO Brands Corporation posted an average positive earnings surprise of 23.93% over the four trailing quarters. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Applied Industrial Technologies currently carries a Zacks Rank #2 (Buy). It posted an average positive earnings surprise of 4.93% over the last four quarters.
Alarm.Com Holdings currently carries a Zacks Rank #2. The company delivered an average positive earnings surprise of 165.56% over the trailing four quarters.
Zacks' Top Investment Ideas for Long-Term Profit
How would you like to see our best recommendations to help you find today’s most promising long-term stocks? Starting now, you can look inside our portfolios featuring stocks under $10, income stocks, value investments and more. These picks, which have double and triple-digit profit potential, are rarely available to the public. But you can see them now. Click here >>