2023-05-31 13:05:18 ET
Xylem ( NYSE: XYL ) on Wednesday was upgraded to Outperform from a previous investment rating of Neutral by analysts at Baird. They said the water-technology company is poised for earnings growth following its purchase of Evoqua Water Technologies (AQUA) in an all-stock deal.
Xylem’s ( XYL ) rose as much as 3.9% to $102.40 before trimming its gain on Wednesday.
“Valuation will always remain rich, but we view Xylem ( XYL ) as a rare stock that can outperform in a healthy economy (significant growth catalysts) or an economic downdraft (resilient earnings and end market exposure/backlog levels),” Michael Halloran, analyst at Baird, said in a May 31 report.
Baird raised its price target for Xylem ( XYL ) to $135 a share from $122 a share previously, based on an enterprise value-to-EBITDA multiple of 17 times and a multiple of 32.5 times estimated EBITDA for 2024.
Xylem’s ( XYL ) stock declined after the company announced on January 23 the agreement to acquire Evoqua (AQUA) in a deal valued at $7.5 billion. Since then, the stock has traded between a range of $93.72 a share and $110.84 a share.
“Xylem ( XYL ) is trading lower than both companies were prior to the transaction, which we view as an attractive opportunity given the combined earnings power and near-term estimate upside or downside protection (depending on the economic backdrop),” according to Baird.
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Xylem upgraded to Outperform at Baird following merger