Xylem deal for Evoqua priced ‘high’ but ‘great’ long-term fit, says Loop Capital

Loop Capital analyst Scott Graham keeps his Hold rating and $99 price target on Xylem (XYL) after the company announced that it is acquiring Evoqua Water (AQUA) for $7.5B. There are many long-term benefits to the combination as multiple sales synergies can be harvested over time and the cost-out target has good visibility, and the deal should incrementally increase Xylem’s sales and earnings growth rates and consistency, the analyst tells investors in a research note. The firm adds however that the acquisition price is too high and estimates the deal to be 10% dilutive to Xylem’s earnings per share.