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Xylem Inc. (XYL), a global leader in water solutions with a market cap of $32.6 billion, specializes in designing and manufacturing advanced technologies for the full water-process cycle. The Washington, District of Columbia-based company operates through four segments: Water Infrastructure; Applied Water; Measurement & Control Solutions; and Integrated Solutions and Services.
Shares of this water and wastewater treatment company have outperformed the broader market over the past 52 weeks. XYL has spiked 34.9% over this time frame, while the broader S&P 500 Index ($SPX) has rallied 28.1%. In 2024, shares of XYL gained 17.3%, mirroring SPX’s YTD return.
Zooming in further, XYL has also outpaced the GX Clean Water ETF’s (AQWA) 18.5% gain over the past 52 weeks and 8.5% returns on a YTD basis.
Xylem's outperformance is driven by strong demand in its Measurement & Control Solutions segment, robust growth in Water Infrastructure and Water Solutions, and the strategic acquisition of Evoqua, which enhanced its water treatment capabilities and revenue. However, despite beating Q2 earnings estimates, the stock slipped 5.7% on Jul. 30 due to the company's raised full-year revenue guidance falling slightly short of analyst expectations. Plus, the stock's lofty valuation, priced at 31.33 times forward earnings, contributed to investor concern.
For the current fiscal year, ending in December, analysts expect XYL’s EPS to grow 12.4% year over year to $4.25. The company’s earnings surprise history is promising. It beat the consensus estimates in each of the last four quarters.
Among the 19 analysts covering the stock, the consensus rating is a “Moderate Buy.” That’s based on 12 “Strong Buy” ratings, one “Moderate Buy,” and six “Holds.”
This configuration is more bullish than three months ago, with 10 “Strong Buy” ratings on the stock.
On Aug. 13, UBS analyst Damian Karas initiated coverage of Xylem with a “Buy” rating and a $165 price target, citing the company's strong positioning as a leading pure-play water company, bolstered by its diverse product suite and strategic $7.5 billion Evoqua acquisition in 2023.
The mean price target of $153.53 represents a premium of 14.4% to XYL’s current levels. The street-high price target of $172 implies a potential upside of 28.2% from the current price.
On the date of publication, Sohini Mondal 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.
