On Oct 10, 2013, we raised our recommendation on
) to Neutral from Underperform, based on huge contract wins.
Why the Upgrade?
Xylem engages in the sales and distribution of products like
pumps, valves, heat exchangers, waste systems and membrane
filtration products, through direct sales force along with
independent channel partners. The company has been successfully
taking steps to grow internationally. In the process, it has won
contracts from the United Arab Emirates, Beijing, Singapore,
Sweden and Colombia in 2013. Recently, Xylem won the largest
ozone contract in China, worth $1.9 billion. With such
diversified and high-value contract wins, Xylem is expected to
generate higher revenues and gain greater market share in the
Xylem's inorganic growth is also in keeping with the company's
strategy to increase overseas operations. In June, the company
acquired the Germany-based private company Pollman Pumpen Ltd.
for $3 million. Leveraging Pollman Pumpen's expertise and
experience, Xylem intends to enhance its existing foothold in the
nation with its products such as Flygt and Godwin.
However, the company has been facing headwinds from the
declining European demand over the past few quarters. The demand
deterioration in Europe pulled down the revenues for transport,
treatment and test products, in the first quarter of 2013.
The trend is expected to continue in the quarters ahead and the
company sees little scope for improvement.
Having operations in several countries exposes Xylem to
various risks, such as foreign currency risks and socio-political
risks. In the first quarter of 2013, the company's revenues
were negatively affected by foreign currency translation impacts
as a result of the appreciation of the U.S. dollar and Swedish
krona against other currencies.
Other Stocks to Consider
Xylem currently carries a Zacks Rank #4 (Sell). Other stocks
worth a watch in the industry include
Manitex International, Inc.
The Middleby Corporation
). While Manitex International and Middleby carry a Zacks Rank #1
(Strong Buy), Colfax carries a Zacks Rank #2 (Buy).
COLFAX CORP (CFX): Free Stock Analysis Report
MIDDLEBY CORP (MIDD): Free Stock Analysis
MANITEX INT INC (MNTX): Free Stock Analysis
XYLEM INC (XYL): Free Stock Analysis Report
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