Water solutions provider
) is set to report third-quarter 2013 results before the opening
bell on Oct 29. In the last reported quarter, it delivered 18.2%
negative earnings surprise. Let's see how things are shaping up
for this announcement.
Factors to Consider
In the second quarter of 2013, Xylem posted disappointing
results with earnings per share of 36 cents, decreasing 27% year
over year. Total revenue in second quarter declined marginally
year over year to $960 million. Revenues were influenced by
strong business in the U.S. residential, commercial and
agricultural services, offset by weak demand in Europe and the
deteriorating public utilities and industrial markets.
In the third quarter 2013, Xylem has launched various products
to gain market share and also won many contracts across the
globe. However, persistent headwinds from the European demand are
likely to impact result in the quarter. To add to the peril,
negative foreign currency translation impact will remain a
possible risk, as it affected second quarter 2013 results due to
appreciation of the U.S. dollar and Swedish krona against other
The disappointing second quarter 2013 results led to a
downward revision in 2013 guidance. The company now expects
adjusted earnings per share for full-year 2013 in the range of
$1.40-$1.50, down from previous guidance of $1.79-$1.89. Revenues
in 2013 are expected to be roughly $3.7 billion, compared with
previous projection of $3.9 billion.
Our proven model does not conclusively show that Xylem is
likely to beat earnings this quarter. That is because a stock
needs to have both a positive
and a Zacks Rank of #1, #2 or #3 for this to happen. That is not
the case here as we see below.
Negative Zacks ESP:
The Expected Surprise Prediction or ESP for Xylem is -2.86% since
the Most Accurate Estimate stands at 34 cents per share, while
the Zacks Consensus Estimate is higher at 35 cents.
Xylem's Zacks Rank #4 (Sell) when combined with a negative ESP
lowers the possibility of a positive surprise prediction. We
caution against stocks with Zacks Rank #4 and #5 (Sell-rated
stocks) going into the earnings announcement, especially when the
company is seeing negative estimate revisions momentum.
Other Stocks to Consider
Other stocks in the industrial goods sector that have both a
positive earnings ESP and a favorable Zacks Rank are:
), earnings ESP of +1.67% and a Zacks Rank #2 (Buy).
Barnes Group Inc.
), withEarnings ESP of +3.77% and a Zacks Rank #3 (Hold).
), withEarnings ESP of +0.95% and a Zacks Rank #3 (Hold).
BARNES GRP (B): Free Stock Analysis Report
FLOWSERVE CORP (FLS): Free Stock Analysis
LITTELFUSE INC (LFUS): Free Stock Analysis
XYLEM INC (XYL): Free Stock Analysis Report
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