Citi has reiterated its "Buy" rating on Xylem Inc. (XYL), raising the price target to $152 from $147, reflecting confidence in the company's ongoing simplification efforts and margin expansion potential. The report highlights Xylem's Q4 results and 2025 outlook, noting an expected adjusted EBITDA margin expansion of 70-120 basis points, which aligns with the company's long-term financial framework. Despite a modestly lower organic growth forecast of 3%-4% for 2025, Citi views the solid margin expansion outlook and healthy organic order trends as positive indicators of durable earnings growth.
Citi's analysis suggests that Xylem's focus on accretive M&A and consistent capital deployment could support outsized growth potential. The report maintains 2025 and 2026 EPS estimates at $4.60 and $4.90, respectively, with the valuation based on a 31x multiple of the 2026 EPS estimate. Citi acknowledges potential risks, particularly in the Measurement & Control Solutions segment, due to "pockets of softness" in Europe and emerging markets, which could lead to quarter-to-quarter volatility.
Xylem was trading at $127.24, down 1.55% on February 5.