Core Points - Xylem Inc. has declared a fourth quarter dividend of $0.40 per share, payable on December 23, 2025, to shareholders of record as of November 25, 2025 [1] - Xylem is a leading global water solutions company with 23,000 employees and reported revenue of $8.6 billion in 2024 [2] - The company reported third-quarter 2025 revenue of $2.3 billion, with earnings per share increasing by 4% on a reported basis and 23% on an adjusted basis [5] Company Overview - Xylem Inc. is a Fortune 500 company focused on water solutions, aiming to create a more water-secure world [2] - The company emphasizes innovation and expertise in optimizing water and resource management [2] Financial Performance - In 2024, Xylem achieved total revenue of $8.6 billion, showcasing strong execution and demand [2] - For the third quarter of 2025, the company reported revenue of $2.3 billion, indicating robust performance [5] - Earnings per share for the third quarter increased by 4% on a reported basis and 23% on an adjusted basis, reflecting effective management and operational execution [5]

Industry Overview - The U.S. Business Services Sector is supported by strong domestic economic fundamentals, encompassing companies that provide consulting, staffing, financial transactions, outsourcing, advertising, waste removal, building maintenance, technology services, and auction/valuation services [1] - The sector has evolved into a mature and resilient ecosystem, with revenues, income, and cash flows now above pre-pandemic levels [2] - The rapid advancement and adoption of artificial intelligence and automation technologies are reshaping the delivery of business services [2] Sector Performance - The Zacks-defined Business Services Sector ranks in the top 38% of the Zacks Sector Rank, indicating an expectation to outperform the market over the next three to six months [3] Recommended Stocks - Five business services stocks with favorable Zacks Rank are recommended: Xylem Inc. (XYL), Thomson Reuters Corp. (TRI), UL Solutions Inc. (ULS), Omnicom Group Inc. (OMC), and Veralto Corp. (VLTO), all carrying a Zacks Rank 2 (Buy) [4] Company Insights Xylem Inc. (XYL) - Xylem experiences steady demand due to the essential nature of its offerings, benefiting from robust demand for smart metering and applications in the U.S. [5] - The Water Infrastructure unit's performance is boosted by growth in transport and treatment application businesses, with an expected revenue growth rate of 3.7% and earnings growth rate of 9.6% for next year [6] Thomson Reuters Corp. (TRI) - Thomson Reuters is a leading provider of value-added information and technology across various sectors, including law, tax, accounting, and healthcare [7] - The company has an expected revenue growth rate of 7.8% and earnings growth rate of 14.2% for next year [8] UL Solutions Inc. (ULS) - UL Solutions provides safety science services across multiple segments, including Industrial, Consumer, and Software and Advisory [9] - The company has an expected revenue growth rate of 5.4% and earnings growth rate of 6.5% for next year [10] Omnicom Group Inc. (OMC) - Omnicom Group's diverse portfolio across traditional and digital marketing segments ensures revenue stability and adaptability [11] - The company has an expected revenue growth rate of 3.2% and earnings growth rate of 6.9% for next year [13] Veralto Corp. (VLTO) - Veralto is positioned for growth through U.S. infrastructure investments and rising semiconductor demand, with a strong focus on water quality and product quality segments [14][15] - The company has an expected revenue growth rate of 5.8% and earnings growth rate of 9.3% for next year [17]

Company Performance - Xylem Inc. (XYL) has shown a strong performance, with a year-to-date increase of 30% [1] - The company has maintained momentum, rising 15% over the past three months and 4.7% in the last month [1] - This growth is primarily attributed to higher margins and better-than-expected growth [1] Market Analysis - The market is beginning to recognize the potential of Xylem Inc. as it continues to perform well [1]

Core Viewpoint - The investment outlook for Xylem Inc. (XYL) remains positive due to strong secular tailwinds, successful integration of Evoqua, and a promising PFAS funding pipeline [1] Group 1: Investment Strategy - The investment approach focuses on long-term investments while also incorporating short-term shorts to identify alpha opportunities [1] - The analysis is based on a bottom-up approach, examining the fundamental strengths and weaknesses of individual companies [1] - The investment duration is medium to long-term, targeting companies with solid fundamentals, sustainable competitive advantages, and growth potential [1]

Core Viewpoint - The investment outlook for Xylem Inc. (XYL) remains positive due to strong secular tailwinds, successful integration of Evoqua, and a promising PFAS funding pipeline [1] Group 1: Investment Strategy - The investment approach focuses on long-term investments while also incorporating short-term shorts to identify alpha opportunities [1] - The strategy is based on bottom-up analysis, emphasizing the fundamental strengths and weaknesses of individual companies [1] - The investment duration is medium to long-term, targeting companies with solid fundamentals, sustainable competitive advantages, and growth potential [1]

Group 1: Water Stocks Overview - Water stocks are shares of companies involved in the supply, treatment, transport, storage, or management of water, including utilities, infrastructure firms, and technology providers [2] - Investors view water stocks as a way to gain exposure to a regulated sector with long-term demand driven by population growth, urbanization, and water scarcity [2] - The companies mentioned had the highest dollar trading volume among water stocks recently [2] Group 2: NuScale Power - NuScale Power Corporation develops and sells modular light water reactor nuclear power plants for various applications, including electrical generation and desalination [3] - The company offers the NuScale Power Module (NPM), which generates 77 megawatts of electricity (MWe), and designs for power plants that can house multiple NPMs [3] Group 3: Coca-Cola - The Coca-Cola Company manufactures and sells a variety of nonalcoholic beverages globally, including soft drinks, water, sports drinks, coffee, tea, and juices [4] Group 4: Ecolab - Ecolab Inc. provides water, hygiene, and infection prevention solutions, operating through three segments: Global Industrial, Global Institutional & Specialty, and Global Healthcare & Life Sciences [5] - The Global Industrial segment focuses on water treatment and cleaning solutions for various industries, including food and beverage processing and power generation [5] Group 5: Xylem - Xylem Inc. designs, manufactures, and services engineered products and solutions, operating through four segments: Water Infrastructure, Applied Water, Measurement & Control Solutions, and Integrated Solutions and Services [6] - The Water Infrastructure segment offers products such as pumps, filtration, disinfection equipment, and mobile dewatering services [6] Group 6: American Water Works - American Water Works Company, Inc. provides water and wastewater services to approximately 1,700 communities across 14 states, serving around 3.5 million active customers [8] - The company serves various customer segments, including residential, commercial, industrial, and public authorities [8]

Core Viewpoint - Xylem's shares have shown strong performance, with a 29.7% increase year-to-date, outperforming both the Zacks Business Services sector and the Zacks Waste Removal Services industry [1] Financial Performance - Xylem has consistently exceeded earnings expectations, reporting EPS of $1.37 against a consensus estimate of $1.24 in its latest earnings report [2] - For the current fiscal year, Xylem is projected to achieve earnings of $4.84 per share on revenues of $8.96 billion, reflecting a 13.35% increase in EPS and a 4.7% increase in revenues [3] - The next fiscal year forecasts earnings of $5.37 per share on revenues of $9.41 billion, indicating year-over-year changes of 11.12% in EPS and 5.01% in revenues [3] Valuation Metrics - Xylem's current valuation metrics show a Price-to-Earnings (P/E) ratio of 31.1X for the current fiscal year, slightly below the peer industry average of 31.8X [7] - On a trailing cash flow basis, the stock trades at 22.8X compared to the peer group's average of 15.4X, and it has a PEG ratio of 2.56, which does not place it among the top value stocks [7] Style Scores - Xylem has a Value Score of C, a Growth Score of B, and a Momentum Score of A, resulting in a combined VGM Score of B [6] Zacks Rank - Xylem holds a Zacks Rank of 2 (Buy), supported by a positive earnings estimate revision trend, indicating potential for further gains [8]

Core Insights - Xylem Inc. is a leading global water technology company specializing in innovative solutions for water and wastewater applications [1] - The company reported strong financial performance, with revenue and earnings per share exceeding market expectations [2][3][4] Financial Performance - For the quarter ending September 2025, Xylem reported revenue of $2.27 billion, representing a 7.8% year-over-year increase and surpassing the Zacks Consensus Estimate of $2.22 billion, resulting in a positive surprise of 1.98% [3][6] - The earnings per share (EPS) for the same quarter were reported at $1.37, an increase from $1.11 in the previous year, exceeding the consensus EPS estimate of $1.24 and delivering a surprise of 10.48% [4][6] Stock Performance - The current stock price of Xylem is $150.50, reflecting an increase of $1.10 or 0.74% [5] - Barclays has set a price target of $172 for Xylem, indicating a potential increase of approximately 14.29% from the current stock price [2][6] - The stock has fluctuated between $146.46 and $152.77 during the day, with $152.77 being the highest price over the past year [5]

Core Insights - Xylem reported revenue of $2.27 billion for the quarter ended September 2025, reflecting a year-over-year increase of 7.8% and exceeding the Zacks Consensus Estimate of $2.22 billion by 1.98% [1] - The company's EPS for the quarter was $1.37, up from $1.11 in the same quarter last year, surpassing the consensus estimate of $1.24 by 10.48% [1] Revenue Breakdown - Measurement & Control Solutions generated $522 million, exceeding the estimated $502.6 million, with a year-over-year increase of 14% [4] - Applied Water revenue was $456 million, slightly below the estimated $463.59 million, with a year-over-year increase of 2% [4] - Water Infrastructure revenue reached $656 million, surpassing the estimate of $647.39 million, representing a year-over-year increase of 5.3% [4] - Water Solutions and Services generated $634 million, exceeding the estimated $604.59 million, with a year-over-year increase of 10.1% [4] Adjusted Operating Income - Adjusted Operating Income for Water Infrastructure was $145 million, above the average estimate of $130.79 million [4] - Adjusted Operating Income for Applied Water was $89 million, slightly above the estimated $87.28 million [4] - Adjusted Operating Income for Water Solutions and Services was $127 million, exceeding the estimate of $103.37 million [4] - Corporate and other adjusted operating income was reported at -$22 million, below the estimate of -$18.8 million [4] - Measurement & Control Solutions had an adjusted operating income of $90 million, below the average estimate of $95.01 million [4] Stock Performance - Xylem's shares returned +3.8% over the past month, outperforming the Zacks S&P 500 composite's +3.6% change [3] - The stock currently holds a Zacks Rank 2 (Buy), indicating potential for outperformance in the near term [3]

Core Insights - Xylem's shares increased by 1.3% following the announcement of stronger-than-expected third-quarter results and an upward revision of its full-year revenue and earnings guidance [4] Financial Performance - Xylem reported third-quarter revenue of $2.27 billion, reflecting an 8% year-over-year increase on a reported basis [4]