Deutsche upgrades Xylem to Buy on ‘clearer catalyst path’

Deutsche Bank upgraded Xylem to Buy from Hold with a price target of $120, up from $104. The analyst now sees a “clearer catalyst path taking shape” and believes current share levels provide an attractive entry point. The firm expects investor interest to pick up into the May 2024 analyst meeting, and says now that Evoqua has been closed for half of a year, there is a higher likelihood of near-term upside earnings surprises on better cost and revenue synergies. The new management team is likely to drive margin expansion and Xylem’s 2024 outlook screens as favorable on a risk-adjusted basis with 45% of sales tied to reliable utility spending and “meaningful” backlog coverage at 60% of next 12 month sales, the analyst tells investors in a research note.