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Xylem (XYL) Hits a New 52-Week High on Improving Prospects

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Machinery company Xylem Inc’s (XYL - Free Report) shares scaled a new 52-week high of $61.39 during its trading session on Aug 28. This improved upon the last 52-week high of $60.73 recorded on Aug 25.

On Aug 28, Xylem closed its trading session at $61.16, yielding a year-to-date return of roughly 24.1%. The trading volume for the session was approximately 0.9 million shares. Positive earnings estimate revisions for 2017 and 2018 as well as anticipated 15% earnings growth in the next three to five years indicate the stock’s potential for further price appreciation.

In the last three months, shares of the company have yielded 18.1% return, outperforming 1.2% decline recorded by the industry it belongs to.

Growth Drivers

Market sentiments have been positive for Xylem for quite some time now. Notably, its shares have rallied 3.1% since the company reported impressive second-quarter 2017 results on Aug 1. Its profitability improved on the back of healthy revenue growth and improved margin profile. Orders were strong in the quarter, growing 8% organically.

In the quarters ahead, Xylem anticipates benefiting from improving industrial markets and growth in residential and commercial markets. Also, it is committed toward increasing its exposure in emerging markets as well as focusing on innovation and technology. Projects wins by the company’s Sensus business will be advantageous. Margin expansion is expected to be driven by productivity enhancement, favorable mix and volume growth.

For 2017, Xylem has increased its adjusted earnings guidance to a range of $2.30-$2.40 per share from the previously projected range of $2.23-$2.38. The revision was mainly driven by expectations of favorable impact from foreign currency translations. Revenues are anticipated to be in a $4.65-$4.70 billion range versus $4.5-$4.6 billion expected earlier. The revised revenue guidance represents year-over-year growth of 24-25%.

We believe that Xylem’s solid prospects have led to the positive revisions in earnings estimates. Over the last 30 days, the stock’s Zacks Consensus Estimate grew 2.2% to $2.37 for 2017 and 3% to $2.74 for 2018. Likewise, earnings estimates for third-quarter 2017 inched up 1.6% to 63 cents. Also, the company has an Earnings ESP of +0.30% for the third quarter. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Xylem Inc. Price and Consensus

 

Xylem Inc. Price and Consensus | Xylem Inc. Quote

Zacks Rank & Stocks to Consider

Xylem currently has $11 billion market capitalization and carries a Zacks Rank #3 (Hold). Better-ranked stocks in the industry include Altra Industrial Motion Corporation (AIMC - Free Report) , Kadant Inc. (KAI - Free Report) and Sun Hydraulics Corporation (SNHY - Free Report) . All these stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Altra Industrial Motion’s earnings estimates for 2017 and 2018 were revised upward in the last 60 days. Also, the company pulled off an average positive earnings surprise of 16.95% for the last four quarters.

Kadant’s average earnings surprise for the last four quarters was a positive 19.29%. Also, earnings expectations for 2017 and 2018 improved over the past 60 days.

Sun Hydraulics’ earnings estimates for 2017 and 2018 were revised upward in the last 60 days. Also, the company performed well in the last quarter, delivering positive earnings surprise of 33.33%.

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