Xylem and Valmont Stocks: Investing in Water Innovation News ad

Water is the lifeblood of our planet, and it is under increasing pressure. Population growth, expanding industrial activity and the looming effects of climate change are leading to a global water shortage crisis. This growing problem has brought attention to the critical role of water technologies in ensuring sustainable water management in the future.

This represents an attractive opportunity for investors. This young sector offers the opportunity to invest in companies at the forefront of innovation, ready to meet fundamental global needs and poised for significant growth.

The 1974 law still drives innovation today

The Safe Drinking Water Act (SDWA) was signed into law in the United States on December 16, 1974. This landmark legislation was a direct response to concerns about the safety and quality of drinking water across the country. Before 1974, widespread pollution and inadequate water treatment posed a significant risk to public health.

The implications of the SDWA extend well beyond regulatory oversight. By creating a clear framework for water quality, the law catalyzed a wave of innovation in the water treatment industry. Companies have been forced to develop and implement advanced technologies to meet increasingly stringent standards.

SDWA’s impact continues to be felt today as it underpins ongoing efforts to modernize water infrastructure, promote water conservation, and ensure access to safe and clean water for all. This created a market sector where water technology companies could thrive by providing solutions that met these regulatory requirements and addressed broader water management issues.

Xylem Inc.: Global Leader in Water Technology

Xylem Inc. New York Stock Exchange: XYL strengthened its position as a global leader in water technology. Operating in more than 150 countries, Xylem offers a comprehensive suite of solutions covering the entire water cycle. Headquartered in Washington, DC, Xylem serves a diverse clientele that includes utilities and municipalities, as well as residential, commercial, agricultural and industrial users.

Xylem’s business is divided into four segments: water infrastructure, water applications, measurement and control solutions, and integrated solutions and services. The Water Infrastructure segment provides technologies for transporting and treating water and wastewater, including well-known brands such as Flygt and Godwin. The Applied Water segment provides solutions for the efficient use of water in a variety of environments, including brands such as Goulds Water Technology and Bell & Gossett. The Measurement and Control Solutions segment offers advanced measurement, networking and analytics technologies through brands such as Sensus and Xylem Vue, enabling smarter water management. At the same time, the Integrated Solutions and Services segment provides technical services and digital solutions for a wide range of water management problems.

Xylem’s fiscal third quarter 2024 (3QFY24) earnings results reflect continued progress. The company reported revenue of $2.1 billion, up 1% year over year, and orders up 8%. Full-year revenue guidance was updated to approximately $8.5 billion, indicating a 15% increase from the prior year. Xylem’s full-year adjusted earnings per share (EPS) forecast was narrowed to 4.22 to 4.24.

Xylem’s strategic acquisition of water data management and analytics specialist Idrica underscores the company’s commitment to digital innovation. The move is expected to enhance the Xylem Vue platform by providing utilities with powerful tools for real-time network monitoring, operational optimization and proactive problem solving. Xylem projects earnings growth of 11.11% in 2025.

Valmont Industries Inc.: infrastructure and agricultural solutions

Valmont Industries Inc. New York Stock Exchange: VMI is a global leader in providing infrastructure and improving agricultural productivity. Valmont’s operations play a critical role in water resource management, primarily through its industry-leading irrigation systems and infrastructure solutions supporting water utilities.

Valmont operates primarily in two business segments: infrastructure and agriculture. The Infrastructure segment accounted for 74.1% of net sales in Valmont’s third quarter fiscal 2024 (3QFY24) earnings report. This segment provides a wide range of products and services, including utility support structures, lighting and transportation solutions, telecommunications infrastructure, coating services and renewable energy solutions. The Agriculture segment, accounting for 25.9% of net sales in the third quarter of fiscal 2024, is focused on mechanized irrigation equipment and related technology solutions under the Valley brand. Valmont’s center-pivot and linear irrigation systems are critical to the efficient use of water in agriculture, a sector that faces a growing need for water conservation.

Valmont’s third-quarter 2024 results showed resilience. Despite a 2.9% year-over-year decline in net sales of $1.0 billion for the quarter, the company achieved solid operating margins and generated strong operating cash flows.

Operating income for the quarter was $125.7 million, or 12.3% higher than the same period in 2023. Adjusted operating income was $120.8 million (11.5% of net sales). The company reported diluted earnings per share (EPS) of 4.11, compared to a diluted loss per share of $2.34 in the third quarter of 2023. Adjusted diluted earnings per share were $4.12.

Weighing investment potential: opportunities and risks

The water technology sector presents a compelling long-term growth story. Increasing global water scarcity caused by population growth, urbanization and climate change is creating unprecedented demand for innovative solutions. Outdated infrastructure in developed countries and the need for new infrastructure in emerging markets further fuel this demand. Xylem and Valmont are well positioned to capitalize on these trends.

Xylem’s extensive water technology portfolio, global reach and focus on digital solutions provide a strong foundation for growth. The acquisition of Idrica and partnerships with utilities such as the Immokalee Water & Sewer District demonstrate Xylem’s commitment to innovation and ability to meet growing market needs.

Valmont’s leadership in irrigation systems, coupled with its infrastructure solutions supporting water utilities, positions the company to benefit from increased investment in agriculture and water infrastructure. The company’s stable cash flow and focus on operational efficiency further enhance its investment attractiveness. Valmont projects earnings growth of 6.11% next year, while Xylem projects earnings growth of 11.11% next year.

However, investors must also consider the risks. Xylem stock has experienced some headwinds recently, including a Peer Performance rating from Wolfe Research, although other firms maintain a more bullish outlook. Valmont has seen recent insider selling, which may raise concerns. However, it is important to note that insider selling can occur for a variety of reasons and does not necessarily reflect a negative outlook. Both companies face risks related to global economic conditions, fluctuations in commodity prices and potential regulatory changes.

Promising future

The water technology sector is poised for further growth and development. As the world grapples with water scarcity and the need for sustainable water management, companies like Xylem and Valmont that provide innovative and effective solutions are well positioned to thrive.

These companies offer investors the opportunity to participate in a financially promising sector that is critical to solving a fundamental global problem. While risks exist, the long-term outlook for water technology remains bright. Investors should conduct careful due diligence based on their individual investment objectives and risk tolerance, and remain abreast of industry trends and company-specific developments. The ongoing need for innovative water solutions is likely to continue to drive growth and create value in this critical sector in the coming years.

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