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Xylem (XYL) Declines 19% YTD: What's Affecting the Stock?
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Shares of Xylem Inc. (XYL - Free Report) have declined since the beginning of 2020. We believe that the price decline mainly reflects the adverse impacts of the pandemic. Also, exposure to other headwinds — including forex woes and cost inflation — must have played spoilsport.
The Rye Brook, NY-based company belongs to the Zacks Manufacturing – General Industrial industry, which, in turn, comes under the ambit of the Zacks Industrial Products sector. The industry is currently at the bottom 26% (with the rank of 187) of more than 250 Zacks industries.
Year to date, the company’s shares have fallen 19% compared with the industry’s and the sector’s declines of 17.1% and 15.5%, respectively. Notably, the S&P 500 has lost just 6.7% during the same period.
The coronavirus outbreak is impacting Xylem’s operations and end markets. For instance, its organic sales in first-quarter 2020 decreased 8% year over year, with 5% being due to the pandemic. The company expects organic sales to decline 20-30% year over year in the second quarter.
For 2020, Xylem kept its projections suspended (that was originally withdrawn on Mar 31, 2020). The company believes that end-market operations, especially in residential and commercial, will be adversely impacted by the pandemic-led woes. Also, delays in capital projects and difficulties in execution as well as labor-market problems might hurt the utilities business. Further, weakness in beverage dispensing, applied water, marine and dewatering businesses might be a spoilsport for the industrial market.
In addition to the coronavirus woes, Xylem is exposed to risks (such as geopolitical uncertainties and unfavorable movements in foreign currencies) emanating from its international operations. Also, cost inflation and woes related to strategic investments might continue to hurt margins. For instance, cost inflation lowered first-quarter operating margin by 260 bps, while the pandemic and strategic investments hurt margin by 150 bps and 60 bps, respectively.
Currently, the Zacks Consensus Estimate for the company’s earnings is pegged at $1.42 for 2020 and $2.50 for 2021, marking declines of 46.4% and 19.9% from the respective 60-day-ago figures. Notably, there have been eight downward revisions in estimates for 2020 (versus none upward) and six for 2021 (versus one upward revision). The consensus estimate for the second quarter has declined 92.9% to 4 cents per share in the past 60 days. Notably, there were seven downward revisions for the quarter.
In addition, the Zacks Consensus Estimate for the company’s revenues is pegged at $992.6 million for the second quarter, $4.6 billion for 2020 and $5 billion for 2021, suggesting a year-over-year decline of 26.2%, a fall of 12% and growth of 8.7%, respectively.
However, efforts to improve operational execution, innovate products and diversified business structure might support Xylem’s results. Also, its cost-reduction actions are likely to yield $100 million in savings in 2020.
Xylem’s Performance Versus Three Industry Players
Year to date, Xylem has underperformed three companies operating in the same industry. Three such stocks are Nordson Corporation (NDSN - Free Report) , Broadwind Energy, Inc. (BWEN - Free Report) and Applied Industrial Technologies, Inc. (AIT - Free Report) , with respective year-to-date growth of 15.7%, a rise of 75.9% and a decline of 11.3%.
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Be among the early investors in the new type of device that experts say could impact society as much as the discovery of electricity. Current technology will soon be outdated and replaced by these new devices. In the process, it’s expected to create 22 million jobs and generate $12.3 trillion in activity.
A select few stocks could skyrocket the most as rollout accelerates for this new tech. Early investors could see gains similar to buying Microsoft in the 1990s. Zacks’ just-released special report reveals 8 stocks to watch. The report is only available for a limited time.
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Xylem (XYL) Declines 19% YTD: What's Affecting the Stock?
Shares of Xylem Inc. (XYL - Free Report) have declined since the beginning of 2020. We believe that the price decline mainly reflects the adverse impacts of the pandemic. Also, exposure to other headwinds — including forex woes and cost inflation — must have played spoilsport.
The Rye Brook, NY-based company belongs to the Zacks Manufacturing – General Industrial industry, which, in turn, comes under the ambit of the Zacks Industrial Products sector. The industry is currently at the bottom 26% (with the rank of 187) of more than 250 Zacks industries.
Year to date, the company’s shares have fallen 19% compared with the industry’s and the sector’s declines of 17.1% and 15.5%, respectively. Notably, the S&P 500 has lost just 6.7% during the same period.
The company currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Factors Affecting the Stock
The coronavirus outbreak is impacting Xylem’s operations and end markets. For instance, its organic sales in first-quarter 2020 decreased 8% year over year, with 5% being due to the pandemic. The company expects organic sales to decline 20-30% year over year in the second quarter.
For 2020, Xylem kept its projections suspended (that was originally withdrawn on Mar 31, 2020). The company believes that end-market operations, especially in residential and commercial, will be adversely impacted by the pandemic-led woes. Also, delays in capital projects and difficulties in execution as well as labor-market problems might hurt the utilities business. Further, weakness in beverage dispensing, applied water, marine and dewatering businesses might be a spoilsport for the industrial market.
In addition to the coronavirus woes, Xylem is exposed to risks (such as geopolitical uncertainties and unfavorable movements in foreign currencies) emanating from its international operations. Also, cost inflation and woes related to strategic investments might continue to hurt margins. For instance, cost inflation lowered first-quarter operating margin by 260 bps, while the pandemic and strategic investments hurt margin by 150 bps and 60 bps, respectively.
Currently, the Zacks Consensus Estimate for the company’s earnings is pegged at $1.42 for 2020 and $2.50 for 2021, marking declines of 46.4% and 19.9% from the respective 60-day-ago figures. Notably, there have been eight downward revisions in estimates for 2020 (versus none upward) and six for 2021 (versus one upward revision). The consensus estimate for the second quarter has declined 92.9% to 4 cents per share in the past 60 days. Notably, there were seven downward revisions for the quarter.
Xylem Inc. Price and Consensus
Xylem Inc. price-consensus-chart | Xylem Inc. Quote
In addition, the Zacks Consensus Estimate for the company’s revenues is pegged at $992.6 million for the second quarter, $4.6 billion for 2020 and $5 billion for 2021, suggesting a year-over-year decline of 26.2%, a fall of 12% and growth of 8.7%, respectively.
However, efforts to improve operational execution, innovate products and diversified business structure might support Xylem’s results. Also, its cost-reduction actions are likely to yield $100 million in savings in 2020.
Xylem’s Performance Versus Three Industry Players
Year to date, Xylem has underperformed three companies operating in the same industry. Three such stocks are Nordson Corporation (NDSN - Free Report) , Broadwind Energy, Inc. (BWEN - Free Report) and Applied Industrial Technologies, Inc. (AIT - Free Report) , with respective year-to-date growth of 15.7%, a rise of 75.9% and a decline of 11.3%.
Biggest Tech Breakthrough in a Generation
Be among the early investors in the new type of device that experts say could impact society as much as the discovery of electricity. Current technology will soon be outdated and replaced by these new devices. In the process, it’s expected to create 22 million jobs and generate $12.3 trillion in activity.
A select few stocks could skyrocket the most as rollout accelerates for this new tech. Early investors could see gains similar to buying Microsoft in the 1990s. Zacks’ just-released special report reveals 8 stocks to watch. The report is only available for a limited time.
See 8 breakthrough stocks now>>