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Xylem Inc. Just Beat Analyst Forecasts, And Analysts Have Been Updating Their Predictions

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Simply Wall St
·4 min read
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Last week saw the newest annual earnings release from Xylem Inc. (NYSE:XYL), an important milestone in the company's journey to build a stronger business. It looks like a credible result overall - although revenues of US$4.9b were in line with what the analysts predicted, Xylem surprised by delivering a statutory profit of US$1.40 per share, a notable 15% above expectations. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.

View our latest analysis for Xylem

earnings-and-revenue-growth
earnings-and-revenue-growth

Taking into account the latest results, the current consensus from Xylem's 15 analysts is for revenues of US$5.21b in 2021, which would reflect a satisfactory 6.8% increase on its sales over the past 12 months. Statutory earnings per share are predicted to bounce 74% to US$2.46. Before this earnings report, the analysts had been forecasting revenues of US$5.13b and earnings per share (EPS) of US$2.44 in 2021. The consensus analysts don't seem to have seen anything in these results that would have changed their view on the business, given there's been no major change to their estimates.

The analysts reconfirmed their price target of US$93.69, showing that the business is executing well and in line with expectations. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. There are some variant perceptions on Xylem, with the most bullish analyst valuing it at US$115 and the most bearish at US$65.00 per share. This shows there is still a bit of diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. Next year brings more of the same, according to the analysts, with revenue forecast to grow 6.8%, in line with its 7.5% annual growth over the past five years. Juxtapose this against our data, which suggests that other companies (with analyst coverage) in the industry are forecast to see their revenues grow 8.0% per year. So although Xylem is expected to maintain its revenue growth rate, it's only growing at about the rate of the wider industry.

The Bottom Line

The most important thing to take away is that there's been no major change in sentiment, with the analysts reconfirming that the business is performing in line with their previous earnings per share estimates. Happily, there were no real changes to sales forecasts, with the business still expected to grow in line with the overall industry. The consensus price target held steady at US$93.69, with the latest estimates not enough to have an impact on their price targets.

Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have estimates - from multiple Xylem analysts - going out to 2024, and you can see them free on our platform here.

That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 4 warning signs with Xylem , and understanding these should be part of your investment process.

This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.