Xylem to buy smart meter maker Sensus USA for $1.7 bn

US water technology company Xylem Inc is nearing a deal to acquire Sensus USA Inc, a provider of advanced metering technologies to utilities, for around $1.7 billion (1.3 billion pounds), including debt, according to people familiar with the matter. With the last stock price up 18.27% from the 200-day moving average, compared to the S&P 500 which has fallen 0.00% over the same time.

The acquisition is still subject to customary closing conditions and regulatory review, but the companies expect to close the deal in the fourth quarter.

In an investor presentation published on its website this month, Xylem said it could deploy as much as $3.5 billion on mergers and acquisitions in the next five years, with any unspent cash returned to shareholders in the form of share buybacks. However, the stock managed to close at $48.45, a loss of 0.19% for the day. The share price is trading in a range of $169.00 – $174.96. It reported adjusted income of $837 million in fiscal 2016, with $159 million in adjusted earnings. They now have a $51.00 price objective on the stock. During the same quarter in the previous year, the company posted $0.43 EPS. Xylem was named to the Dow Jones Sustainability Index, North America for the last four years for advancing sustainable business practices and solutions worldwide, according to a press release.

The electric metering business has been slow in recent years, particularly in North America and Europe, but is picking up somewhat in the U.S.as NY distribution utilities look to roll out smart meters, and MA utilities do the same.

Xylem Inc (XYL): Suffolk Capital Management reduced its stake in Xylem Inc by 6.57% during the most recent quarter end.

The company’s strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, expanding profit margins, solid stock price performance and reasonable valuation levels. Xylem has a consensus rating of “Hold” and an average price target of $44.23.

Xylem has been an active buyer in the water tech sector. Nine research analysts have rated the stock with a hold rating and six have assigned a buy rating to the stock. The Company is an equipment and service provider for water and wastewater applications with a portfolio of products and services addressing the cycle of water, from collection, distribution and use to the return of water to the environment.