Xylem Inc. XYLis slated to report first-quarter 2018 results before the opening bell on May 1.
In the last four quarters, the company reported better-than-expected results in two quarters, while lagged estimates in one and met in the other. The average four-quarter earnings surprise is a negative 0.
Let’s see how things are shaping up prior to this announcement.
Factors to Play
Stronger smart-meter business, sturdier analytics sales, higher light industrial markets’ demand, ongoing government investments in water infrastructure projects, and recovering mining as well as energy market conditions are expected to drive Xylem’s top-line performance in the first quarter. The company also believes strategic project wins, product launches, acquisition benefits and favorable exchange rates will aid in boosting its revenues in the quarters ahead.
From end-markets’ perspective, public utility and industrial end-market sales will likely mark highest growth in Europe and the United States, in the near future. However, robust industrial sales in the emerging countries, like India and China, will likely be offset by softness in Latin-American industrial revenues. Commercial end-market sales will likely be the strongest in China and India. Also, residential end-market revenues are predicted to improve in China and the Asia Pacific but will likely face stiff competition in the United States in the near term.
Xylem anticipates to record year-over-year revenue growth of 5-6% in the first quarter.
The Zacks Consensus Estimate of first-quarter revenues for the company’s Applied Water segment is currently pegged at $365 million, lower than $333 million recorded in the year-ago quarter.
The Zacks Consensus Estimate of first-quarter revenues for the company’s Water Infrastructure segment is currently pegged at $464 million, lower than $496 million recorded in the year-earlier quarter.
Ongoing commercial initiatives, greater operational excellence, elevated volumes, high margins secured from acquired businesses, and reduced corporate taxes are expected to have favorably impacted Xylem’s profitability in the to-be-reported quarter. Nevertheless, persistence of headwinds like unfavorable revenue mix, input-cost inflation and expenses relating to the ongoing product-localization investments might have depressed the company’s bottom-line performance in the quarter.
Xylem anticipates to record adjusted operating margin of 11.3%-11.5% in the first quarter. However, the company noted that the Pure Technologies buyout (February 2017) will dilute its earnings per share by a penny, in the quarter to be reported.
Notably, the Zacks Consensus Estimate of first-quarter adjusted operating income of Xylem’s Applied Water and Water Infrastructure segments are currently pegged at $53 million and $55 million, respectively, lower than $61 million and $103 million recorded in the last quarter.
Earnings Whispers
Xylem’s favorable Zacks Rank #3 (Hold), when combined with an Earnings ESPof -0.10%, makes surprise predictions inconclusive.