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Xylem's Robust Water Treatment Services to Boost Growth

On May 4, 2016, we issued an updated research report on premium diversified machinery company, Xylem Inc. XYL. The company provides non-imitable engineering services that are widely used in different types of wastewater and water applications. Since its inception, Xylem has successfully expanded the scale of its business across international markets like the Asia Pacific, Europe and the U.S. However, at present, the company is facing certain market headwinds.  

Growth Prospects

Increasing demand for wastewater and water infrastructure services from the Middle East, the U.S. and certain emerging markets have been boosting Xylem’s revenues by strengthening its public utility sector’s business. The company’s new acquisitions are also expected to support revenue growth and margin expansion in the near term.

Also, Xylem’s increased backlogs, volumes, greater cost discipline and improved operational efficacy should help to improve its business over time. Based on these positives, Xylem estimates revenues worth $3.7 billion in full-year 2016. The company also expects organic revenue growth of 2–4% year over year. Full-year adjusted earnings guidance now lies in the range of $1.98–$2.08 per share as against the previous estimation of $1.95–$2.05.

Investors’ Concerns

We believe that this Zacks Rank #2 (Buy) stock would continue to witness improvement on its top and bottom line in the quarters ahead. However, certain issues such as market share loss due to stiff competition and unfavorable currency fluctuation might depress revenues and margins in the near term.

Other Stocks to Consider

Other favorably placed stocks from the industry include China High Speed Transmission Equipment Group Co., Ltd. CHSTY, Gorman-Rupp Co. GRC and Luxfer Holdings PLC LXFR. All the three companies currently sport a Zacks Rank #1 (Strong Buy).

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GORMAN RUPP CO (GRC): Free Stock Analysis Report
 
LUXFER HOLDINGS (LXFR): Free Stock Analysis Report
 
XYLEM INC (XYL): Free Stock Analysis Report
 
CHINA HIGH SPEE (CHSTY): Free Stock Analysis Report
 
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