Xylem (XYL) to Report Q3 Earnings: What's in the Offing?

Xylem Inc. XYL is scheduled to release third-quarter 2020 results on Oct 29, before market open.

The company delivered better-than-expected results in one of the trailing four quarters, while recording in-line results in two and lagging estimates once. Earnings surprise was a negative 8.82%, on average. In the last reported quarter, the company’s earnings of 40 cents surpassed the Zacks Consensus Estimate of 39 cents.

In the past three months, shares of this water solutions provider increased 21.2% compared with the industry’s growth of 9.8%.


Let us delve deeper.

Key Factors & Estimates for Q3

The adversities caused by the COVID-19 pandemic hurt Xylem’s results in the second quarter of 2020, with organic sales declining 12% year over year. The same trend is expected to have continued in the third quarter.

Notably, Xylem anticipates a year-over-year organic sales decline of 8-12% for the third quarter. For the segments, a mid- to high-teens decline is expected for Measurement & Control Solutions, while a fall of mid- to high-single digits is predicted for Water Infrastructure. Also, sales for Applied Water are predicted to fall in low-teens.

However, healthy backlog and impressive contract wins as well as solid product offerings and focus on innovation are expected to have aided the company’s performance in the quarter. Also, its diversified operations have been boons.

Moreover, savings from cost actions are likely to have aided the quarter’s margins. The company predicts operating margin of 11-11.5% in the quarter as compared with 9.3% in the second quarter.

The Zacks Consensus Estimate for third-quarter revenues of $1,168 million suggests a 9.9% dip from the year-ago reported figure and a 0.7% increase from the previous quarter. The estimate for earnings is pegged at 52 cents per share, suggesting a decline of 36.6% from the year-ago quarter’s reported figure and 30% growth from the second quarter of 2020.

For the Water Infrastructure segment, the Zacks Consensus Estimate for revenues is pegged at $500 million, implying a 5.8% slip from the figure reported a year ago and a 14.2% increase from the sequential quarter. The revenue estimate for Applied Water is pegged at $333 million, suggesting declines of 11.4% and 1.5% from the year-ago quarter’s reported figure and the previous quarter, respectively.

Also, Measurement & Control Solutions’ revenue estimates are pegged at $330 million, suggesting a 15.2% decline from the year-ago reported figure and a fall of 4.9% 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 +3.42% as both the Most Accurate Estimate of 53 cents is above the Zacks Consensus Estimate of 52 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 +2.97% and is a Zacks #2 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 +3.24% and a Zacks Rank of 2.

Flowserve Corporation FLS currently has an Earnings ESP of +2.56% and a Zacks Rank #2.

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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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