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Xylem (XYLU) to Report Q3 Earnings: What's in the Offing?

Xylem Inc. XYL is slated to report third-quarter 2017 results on Oct 31, before the market opens.

Over the last three months, Xylem’s shares yielded a return of 13.8%, outperforming 9.4% growth recorded by the industry.



The company pulled off an average positive earnings surprise of 0.45% over the last four quarters. In second-quarter 2017, the company’s earnings came in at 59 cents, higher than the Zacks Consensus Estimate of 57 cents per share.

Let’s see how things are shaping up prior to this announcement.

Factors at Play

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 augment Xylem’s revenue growth trajectory in third-quarter 2017.

Xylem believes robust residential and commercial building services businesses will likely strengthen the company’s Applied Water segment’s performance in the quarter to be reported. The Zacks Consensus Estimates for revenues from this segment is pegged at $357 million, higher than $333 million recorded in the prior quarter.

Xylem also anticipates that stronger treatment applications and transport businesses will drive performance of the Water Infrastructure segment in the third quarter. Notably, stabilizing mining and energy market conditions, along with new opportunities in the construction business, will likely bolster the segment’s revenues. The Zacks Consensus Estimates for revenues for this segment is pegged at $515 million for the to-be-reported quarter, higher than $419 million recorded in the previous quarter.

In addition to this, restructuring initiatives undertaken to secure productivity gains and greater cost discipline will likely be conducive to third-quarter results. Also, the acquisitions of Sensus and Visenti (October 2016) are also expected to bolster Xylem’s revenues and profitability by fortifying its public utility business.

However, the company noted that a stronger U.S. dollar might dent its overseas markets sales and profits in the quarter to be reported. Further, headwinds such as sudden supply chain issues or stiff industry rivalry remain other concerns.

Xylem currently carries a Zacks Rank #2 (Buy). The Zacks Consensus Estimate for the stock is currently pegged at 64 cents for the quarter under review.

It should be noted that we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Other Stocks to Consider

Here are some stocks within the industry that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat:

Barnes Group, Inc. B currently sports a Zacks Rank of 1 (Strong Buy). The company’s EPS is predicted to be up 10% in the next three to five years. You can see the complete list of today’s Zacks Rank #1 Rank stocks here.

Altra Industrial Motion Corp. AIMC carries a Zacks Rank of 2. Over the next three to five years, the company’s EPS is projected to be up 8%.

Graco Inc. GGG also holds a Zacks Rank of 2. The company’s EPS is estimated to improve 10.50% during the same time frame.

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Graco Inc. (GGG): Free Stock Analysis Report
 
Barnes Group, Inc. (B): Free Stock Analysis Report
 
Altra Industrial Motion Corp. (AIMC): Free Stock Analysis Report
 
Xylem Inc. (XYL): Free Stock Analysis Report
 
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