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Xylem-Planet Water to Extend Tie Up to Solve Water Issues

Zacks Equity Research

Xylem Inc. XYL and Planet Water Foundation recently announced their intention to extend collaboration to solve water issues across the most disadvantaged communities of the world. Notably, the companies have been long-standing partners, helping provide potable and clean water access in more than 400 communities across 12 countries. As noted by Xylem, the new terms of the collaboration will allow the company to extend its participation to more than 1,100 projects in 13 countries.

The expanded partnership with Planet Water, a non-profit organization that offers clean water access and hygiene education programs will involve installation of Xylem’s pumping technology across all water filtration and sanitation solutions of the former. As a matter of fact, the installation will enable Planet Water to cater to the growing requirements of clean and safe drinking water in communities across remote and rural areas.

In March 2019, Xylem’s Watermark’s humanitarian disaster response team worked closely with Planet Water following Cyclone Idai’s landfall in Africa. Xylem deployed its technical expertise for installation of Planet Water’s AquaBlock, which catered to the emergency needs of potable, safe water across several camps in the affected region.

Our Take

For 2019, Xylem anticipates organic sales in the industrial end market to be adversely impacted by weak business in the Middle East and Europe, softness in China, as well as moderation in the U.S. general industry. Softness is also predicted in the oil and gas/mining market. Notably, organic sales for the industrial end-market are predicted to grow in a low-single digit, down from previously projected low to mid-single digit.

Also, the company has been grappling with increasing cost of sales and operating expenses. From 2016 to 2018, the company’s cost of sales rose 11.3% (CAGR) and operating expenses jumped 9.2% (CAGR). Notably, its cost of sales moved up 2.6% year over year and selling, general and administrative expenses rose 0.3% in the second quarter of 2019.

In the past six months, this Zacks Rank #4 (Sell) stock has lost 2% compared with the industry’s decline of 1.2%.

Moreover, analysts have become increasingly bearish on Xylem. In the past month, the Zacks Consensus Estimate for 2019 earnings has decreased from $3.22 to $3.17 on account of seven downward estimate revisions versus none upward.

Key Picks

Some better-ranked stocks from the same space are Dover Corporation DOV, DXP Enterprises, Inc. DXPE and Roper Technologies, Inc. ROP. All these companies carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Dover delivered a positive average earnings surprise of 6.91% in the trailing four quarters.

DXP Enterprises pulled off a positive average earnings surprise of 18.06% in the trailing four quarters.

Roper pulled off a positive average earnings surprise of 6.92% in the trailing four quarters.

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