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Xylem (XYL) Withdraws Guidance Based on Coronavirus Concerns

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Zacks Equity Research
·3 min read
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Xylem Inc. XYL has withdrawn its earlier announced guidance for the first quarter and 2020 on end-market uncertainties, owing to the coronavirus outbreak.

Also, the company announced that the commercial activities and the supply chain have been disrupted due to the coronavirus pandemic. However, it remains committed to protect the safety, health and well-being of employees, customers, partners and communities amid the crisis.

First-Quarter & 2020 Guidance Withdrawn

On the fourth-quarter 2019 conference call, held in February, Xylem had anticipated an adverse impact of 3-4 cents on its first-quarter 2020 adjusted earnings per share from the initial, localized emergence of the coronavirus in China. Also, the company had cautioned that the outbreak of coronavirus would impact its revenues. Notably, it had anticipated that the pandemic would hurt its first-quarter organic revenues by 1-2%.

For 2020, the company had anticipated adjusted earnings of $2.96-$3.16 per share, suggesting growth of 1-8% from the year-ago reported figure. Also, for the year, it had expected revenues of $5.3-$5.35 billion, indicating year-over-year growth of 1-3%.

However, on uncertainties regarding the impact of the outbreak on financial and operating results, the company has now withdrawn its guidance for the first quarter and 2020.

Notably, the duration of the coronavirus pandemic, its geographic spread and the impacts of the governmental regulations imposed in response to the crisis will likely have a bearing on Xylem’s results. This along with its impact on the demand for the company’s products and services, and supply chain will likely get reflected in the yearly results.

Bottom Line

The COVID-19 pandemic has dealt a further blow to the manufacturing sector, which was already reeling under the U.S.-China trade tensions and weak global demand. Factory closures across the globe, supply-chain disruptions, low demand for goods and the impacts of the restrictions imposed by several governments, among others, have affected the sector.

Zacks Rank, Price Performance and Estimate Trend

Xylem, with an $11.7-billion market capitalization, currently carries a Zacks Rank #4 (Sell).

Over the past year, the company’s share price has decreased 18.7% compared with the industry’s decline of 17.7%.

In the past 30 days, the Zacks Consensus Estimate for its earnings has been lowered by 0.6% to $3.07 for 2020 and by 2% to $3.42 for 2021.

Stocks to Consider

Some better-ranked stocks are Tennant Company TNC, Broadwind Energy, Inc. BWEN and Griffon Corporation GFF. While Tennant currently sports a Zacks Rank #1 (Strong Buy), Broadwind Energy and Griffon carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Tennant delivered a positive earnings surprise of 26.60%, on average, in the trailing four quarters.

Broadwind Energy delivered a positive earnings surprise of 10.42%, on average, in the trailing four quarters.

Griffon delivered a positive earnings surprise of 20.34%, on average, in the trailing four quarters.

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