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Xylem (XYL) to Report Q4 Earnings: What's in the Cards?

Zacks Equity Research
·4-min read

Xylem Inc. XYL is scheduled to release fourth-quarter 2019 results on Feb 6, before the market opens.

The company witnessed weaker-than-expected results in one of the trailing four quarters while recorded in-line results in others. Earnings surprise was a negative 2.59%, on average. In the last reported quarter, the company’s earnings of 82 cents matched the Zacks Consensus Estimate.

In the past three months, shares of this water solutions provider have gained 4.6% compared with the industry’s growth of 2.6%.



Let us delve deeper.

Key Factors & Estimates for Q4

Uncertainties in industrial and commercial markets as well as adverse impacts of tight labor market on project timings are expected to get reflected in fourth-quarter results. The company predicts organic sales growth of roughly 2% in the quarter, indicating a decline from the previous expectation of 5% due to softer-than-expected volumes from short-cycle businesses in the United States.

The Zacks Consensus Estimate for fourth-quarter revenues of $1,380 million suggests a 0.4% dip from the year-ago reported figure.

On a segmental basis, weakness in equipment sales to distributors operating in the construction, mining and oil & gas markets as well as decelerating rental service business might reflect on Water Infrastructure results. However, business in the emerging markets is expected to have aided.

For the Water Infrastructure segment, the Zacks Consensus Estimate for revenues is pegged at $594 million, implying a 2.5% slip from the figure reported a year ago.

Productivity actions and favorable pricing positively impacted the operating margin in the third quarter while cost inflation and strategic investments affected the same. This trend is most likely to have continued in the fourth quarter too, weighing on the margins.  

For the quarter to be reported, Xylem projects the operating margin to be 15.3-15.5%, hinting at growth of 30 basis points (bps) at the midpoint from the prior-year reported number. This margin expansion suggests a contraction from the 180-bps increase expected earlier due to the adverse impacts of 90 bps from tepid volumes and 60 bps from lower margin mix.

Adjusted earnings for the to-be-reported quarter are anticipated to be 88-90 cents per share. The midpoint of 89 cents is lower than the previous count of $1.02 due to the negative impact of 9 cents from depleted volumes and 4 cents of weakness from margin mix. However, forex woes are envisioned to have been offset by interest tailwinds.

The Zack Consensus Estimate for the company’s earnings per share is pegged at 89 cents, indicating growth of 1.1% from the year-ago reported figure and an 8.5% increase from the number reported in the previous quarter.

Earnings Whispers

Our proven model doesn’t conclusively predict an earnings beat for Xylem this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of beating estimates. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Xylem has an Earnings ESP of -0.42%.

Xylem Inc. Price, Consensus and EPS Surprise

Xylem Inc. Price, Consensus and EPS Surprise
Xylem Inc. Price, Consensus and EPS Surprise

Xylem Inc. price-consensus-eps-surprise-chart | Xylem Inc. Quote

Zacks Rank: Xylem currently carries a Zacks Rank #3.

Stocks to Consider

Here are some companies that you may want to consider as according to our model, these have the right combination of elements to beat on earnings this reporting cycle:

The Manitowoc Company, Inc. MTW presently has an Earnings ESP of +32.14% and a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Lindsay Corporation LNN currently has an Earnings ESP of +8.07% and is Zacks #1 Ranked.

Tennant Company TNC currently has an Earnings ESP of +4.20% and a Zacks Rank #2.

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Xylem Inc. (XYL) : Free Stock Analysis Report
 
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