Rising Efficiency Offsets Flat Organic Demand for Xylem to Drive 10% 3Q EPS Growth; Maintain $45 FVE
We plan to maintain our $45 fair value estimate for Xylem after mixed third-quarter results and as management largely confirmed its 2016 outlook. After a quarter-to-date stock price decline of roughly 10%, our fair value estimate remains roughly 4%-5% below the current share price. This valuation reflects a divergence between, on the one hand, investor optimism for the water sector in general and for Xylem stock in particular, and on the other hand, the reality of the past several years of modes...Xylem is water technology company. The company designs, manufactures and services engineered solutions ranging across a variety of applications primarily in the water sector, but also in electric and gas. The company's business segments are: water infrastructure, which serves the water infrastructure sector with pump systems, filtration, ultraviolet and ozone systems and pumping solutions; Applied Water, which serves the usage applications sector with water pressure boosting systems; and Measurement and Control Solutions, which serves the utility infrastructure solutions and services sector by delivering communications, smart metering, measurement and control technologies and infrastructure technologies.
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