Xylem Inc. Faces Challenges Amid Strong Market Performance
Washington, D.C.-based Xylem Inc. (XYL) specializes in designing, manufacturing, and servicing advanced water technologies. With a market cap nearing $29.8 billion, this company operates in over 150 countries, focusing on innovative water solutions through smart technology.
Stock Performance Falls Short of Expectations
Over the past year, Xylem’s shares have struggled, rising just 21.1%. In contrast, the broader S&P 500 Index ($SPX) saw a 30.6% gain during the same period. Year to date, XYL has increased by 7.1%, lagging behind SPX’s 23.6% return.
When compared to the Industrial Select Sector SPDR Fund (XLI), which gained 31.5% over the past year and 21.9% year-to-date, XYL’s performance is even less impressive.
Earnings Report Reveals Revenue Shortfalls
On October 31, Xylem’s shares dropped by 6.5% following the release of its Q3 earnings. The company reported revenues of $2.1 billion, falling short of the expected $2.2 billion. A 4% decline in the Applied Water segment, driven by softness in Europe and emerging markets, contributed to this shortfall. Delays in projects within the Measurement & Control Solutions (MCS) and Water Solutions & Services (WSS) segments also impacted results. Despite these setbacks, Xylem’s adjusted EPS of $1.11 per share met expectations, aided by a 140-basis-point expansion in its EBITDA margin, highlighting effective operational management.
Outlook for the Current Fiscal Year
Analysts anticipate a year-over-year EPS growth of 11.9%, projecting it will reach $4.23 by year’s end in December. Xylem has a favorable earnings surprise history, meeting or beating consensus estimates in the last four quarters.
Analyst Ratings and Price Targets
Of the 18 analysts covering XYL, the consensus rating is “Moderate Buy,” which includes 10 “Strong Buy,” one “Moderate Buy,” and seven “Hold” ratings. This suggests a slight decline in bullishness compared to three months ago when 11 analysts recommended a “Strong Buy.”
On November 1, Barclays reaffirmed its “Outperform” rating on XYL but adjusted the price target to $154, indicating a 25.7% upside potential from current levels. Additionally, the average price target stands at $151.60, suggesting a nearly 23.8% increase. The highest target, priced at $172, implies a potential upside of 40.4%.
On the date of publication, Neharika Jain did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information, please view the Barchart Disclosure Policy here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
