Xylem (XYL) to Report Q2 Earnings: What's in the Cards?

Xylem Inc. XYL is scheduled to release second-quarter 2020 results on Jul 30, before market open.

The company delivered weaker-than-expected results in one of the trailing four quarters, while recording in-line results in the others. Earnings surprise was a negative 9.46%, on average. In the last reported quarter, the company’s earnings of 23 cents lagged the Zacks Consensus Estimate of 37 cents.

In the past three months, shares of this water solutions provider have moved up 2% compared with the industry’s growth of 14%.


Let us delve deeper.

Key Factors & Estimates for Q2

Xylem’s second-quarter results are expected to reflect the impacts of the coronavirus outbreak on its businesses in end markets served. Also, cost inflation and unfavorable movements in foreign currencies might have played spoilsport, as it did in the first quarter of 2020.

However, the severity of the headwinds is expected to have been partially offset by benefits from the company’s diversified business structure, solid product offerings and contract wins in both emerging and developed nations. Also, cost-management efforts and a healthy balance sheet are anticipated to have aided performance.

The company expects second-quarter revenues to decline 14% on a year-over-year basis, with organic sales expected to fall 12%. Notably, it previously projected an organic sales decline of 20-30% for the second quarter.

Adjusted earnings per share in the second quarter are anticipated to be 37-39 cents, suggesting rise from 23 cents reported in the first quarter. On a reported basis, earnings will likely be 15-17 cents in the second quarter.

The Zacks Consensus Estimate for second-quarter revenues of $1,111 million suggests a 17.4% dip from the year-ago reported figure and a 1.1% decline from the previous quarter. The estimate for earnings is pegged at 32 cents per share, suggesting a decline of 59.9% from the year-ago quarter’s reported figure and 39.1% growth from the first quarter of 2020.

For the Water Infrastructure segment, the Zacks Consensus Estimate for revenues is pegged at $430 million, implying a 23.4% slip from the figure reported a year ago and a 1.8% fall from the sequential quarter. The revenue estimate for Applied Water is pegged at $279 million, suggesting declines of 29.2% and 17.5% from the year-ago quarter’s reported figure and the previous quarter, respectively.

Also, Measurement & Control Solutions’ revenue estimate is pegged at $279 million, suggesting a 28.5% decline from the year-ago reported figure and a fall of 19.6% from the previous quarter.

Earnings Whispers

Our proven model suggests 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. That is exactly the case with Xylem as shown below. 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 +21.09% as both the Most Accurate Estimate of 39 cents is above the Zacks Consensus Estimate of 32 cents.

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.

Other Stocks to Consider

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

Fortune Brands Home & Security, Inc. FBHS currently has an Earnings ESP of +9.08% and is a Zacks #1 Ranked player. You can see the complete list of today’s Zacks #1 Rank stocks here.

Regal Beloit Corporation RBC presently has an Earnings ESP of +8.81% and a Zacks Rank of 2.

Illinois Tool Works Inc. ITW currently has an Earnings ESP of +8.23% and a Zacks Rank #3.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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