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What's in the Cards for Xylem (XYL) This Earnings Season?

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Xylem Inc. XYL is slated to report fourth-quarter 2017 results before the opening bell on Feb 1.

The company pulled off an average positive earnings surprise of 0.37% over the last four quarters. Notably, Xylem’s adjusted earnings per share in third-quarter 2017 came in at 65 cents per share, beating the Zacks Consensus Estimate by a penny.

Our proven model predicts that Xylem will likely report a positive surprise in the quarter under review, as it has the right combination of the two key ingredients.

Zacks ESP & Rank: Xylem has an Earnings ESP of +1.65% and also carries a favorable Zacks Rank #3 (Hold).

Xylem Inc. Price and EPS Surprise

 

Xylem Inc. Price and EPS Surprise | Xylem Inc. Quote

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

We only caution against stocks with Zacks Ranks #4 and #5 (Sell rated) going into the earnings announcement, especially when the company is seeing a negative estimate revision momentum.

What’s Driving the Better-Than-Expected Earnings?

Xylem believes elevated commercial and residential end-market’s demand will bolster revenues of its Applied Water segment in the quarters ahead. Moreover, the new investments made in sales teams and energy efficient products will likely strengthen the segment’s near-term performance. The Zacks Consensus Estimate for revenues from Xylem’s Applied Water segment is currently pegged at $383 million for fourth-quarter 2017, higher than $354 million recorded in the prior quarter.

The company expects that elevated infrastructure spending of the government authorities in developing countries (like India) and solid demand for state-of-the-art water solutions are anticipated to boost the top-line results of Xylem’s Water Infrastructure segment. The Zacks Consensus Estimates for revenues for this segment is pegged at $577 million for the to-be-reported quarter, higher than $520 million recorded in the previous quarter.  

Moreover, improved environmental monitoring and smart electric businesses will likely reinforce Xylem’s analytics arm and thereby boost the aggregate sales of Xylem’s Measurement & Control Solution segment.

Xylem anticipates to generate revenues of $4.7 billion for 2017 (estimating year-over-year growth of 24-25%). Notably, the company estimates organic revenues to be up in the range of 3-4% in the quarter under review.

The company also firmly believes stellar top-line performance, improved productivity and greater cost discipline will bolster its bottom-line results in the quarters ahead. Notably, it anticipates to secure $130 million of cost savings for full-year 2017 (predicting year-over-year increment of 10%). The company projects to report adjusted earnings in the band of $2.39-$2.41 per share for 2017, higher than the previously estimated view of $2.30-$2.40 per share.

Key Picks

Here are some stocks in the Zacks Categorized Industrial Products Sector that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat:

Deere & Company (DE - Free Report) , with an Earnings ESP of +3.29% and a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Graphic Packaging Holding Company GPK, with an Earnings ESP of +0.52% and a Zacks Rank #2.

Donaldson Company, Inc. DCI, with an Earnings ESP of +3.45% and a Zacks Rank #3.

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