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Have Water Stocks Hit A Bottom?

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Have Water Stocks Hit A Bottom?

Wedbush analyst David Rose said that there is a "sense" that water stocks are "approaching the bottom in earnings." However, he cautioned that there are still headwinds. In total, there is a "need to replenish this backlog soon in order to drive growth into next year."

Rose pointed to Rexnord Corp (NYSE: RXN) and Calgon Carbon Corporation (NYSE: CCC) as potential bottoms. Rexnord has dropped 24 percent year-to-date, with more than 7 percent of that decline coming in the past month. Calgon has performed slightly better on the year, falling 22.5 percent after a 12.5 percent decline in the past month. Wedbush, however, did warn that Calgon could see "increased pricing pressure" given a recent Supreme Court ruling.

On the positive side, Wedbush suggested that there is an improving climate around the municipal water sector. Rose rated Muller Water Products, Inc. (NYSE: MWA), Tetra Tech, Inc. (NASDAQ: TTEK) and Xylem Inc (NYSE: XYL) as Overweight. The firm said it is impressed by Muller, Tetra and Xylem's ability to generate cash, while there are also other "tailwinds" in the sector.

"There are some opportunities for patient value investors," the note concluded, namely in Flowserve Corp (NYSE: FLS) and SPX Corporation (NYSE: SPW). This follows commentary from these companies that there are "signs of stabilization" from more consistent oil prices and flat orders. Rose also rated Flowserve and SPX Corporation as Overweight.

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Latest Ratings for RXN

DateFirmActionFromTo
Nov 2020KeyBancMaintainsOverweight
Oct 2020Deutsche BankMaintainsBuy
Jul 2020OppenheimerMaintainsOutperform

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