A Torrent of Good News for Xylem

09/26/2012 9:45 am EST


Jim Jubak

Founder and Editor, JubakPicks.com

The water-treatment company seems to be meeting its expectations and then some, writes MoneyShow's Jim Jubak, also of Jubak's Picks.

I added Xylem (XYL) to my Jubak’s Picks portfolio on September 4, with a target price of $30 a share by September 2013. Time for a quick update on some post-pick news. (I added Xylem after my September 4 post on water; for more on the sector, see that post here.)

First, on September 6, Xylem affirmed its prior targets for fiscal 2012. The company projected revenue for $3.8 billion (against the Wall Street consensus of $3.8 billion) and year-over-year earnings per share growth of 4% to 10%.

Second, on September 19, Xylem announced that it was doubling its target for acquisitions this year to $300 million to $500 million. That fits with the trajectory of the consolidating water-treatment sector, and with the company’s comments that it sees acquisitions adding one to two percentage points of growth for the long term.

And third, on September 25, Xylem reported that it had been awarded a contract to supply systems for a new wastewater-treatment plant in Campo Grande in Brazil. This is important confirmation of Xylem’s ability to reach its goal of growing emerging markets to better than 20% of company revenue.

On these three items, I’m going to nudge my target price for Xylem to $31 a share by September 2013.

Full disclosure: I don’t own shares of any of the companies mentioned in this post in my personal portfolio. The mutual fund I manage, Jubak Global Equity Fund http://jubakfund.com/, may or may not now own positions in any stock mentioned in this post. The fund did not own shares of Xylem as of the end of June. For a full list of the stocks in the fund as of the end of June see the fund’s portfolio at http://jubakfund.com/about-the-fund/holdings/

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