Oppenheimer Raises Price Target on Xylem (XYL) to $58; Reiterates Outperform
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Oppenheimer reiterated an Outperform rating on Xylem (NYSE: XYL), and raised the price target to $58.00 (from $55.00), after meeting with management. Management remains confident that break & fix and project momentum will sustain L/MSD growth going forward. Related proposals are complex and the shift in political climate may further extend lead times, realistically limiting near-term upside from stimulus programs.
Analyst Jim Giannakouros commented, "We remain bullish on XYL after hosting a meeting with CEO Patrick Decker and CFO Mark Rajkowski at Xylem headquarters. Topics included the strength of the US muni cycle (and implications of the changing political backdrop), Sensus' strategic role in the XYL portfolio (including discussion of revenue and cost synergies), and updates on core operating margin trajectory (with a preliminary look into 2017). Overall, our favorable core business outlook is largely unchanged (infrastructure stimulus offering intermediate-term upside) and we left the meeting with a greater appreciation for what the Sensus platform can provide under the XYL umbrella. All in, we believe the "three pillars" of the XYL thesis (L/MSD organic growth, operating margin runway, capital deployment) remain solidly intact. Reiterate Outperform."
Shares of Xylem closed at $54.75 yesterday.
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