UPDATE: Stifel Initiates Coverage on Xylem on Valuation, Good Secular Drivers

In a report published Wednesday, Stifel analyst Nathan Jones initiated coverage on Xylem (NYSE: XYL) with a Hold rating.

In the report, Stifel noted, “We are initiating coverage of Xylem Inc. (XYL) with a Hold rating on the shares. Xylem is a leading, global, pure play water company with businesses in water infrastructure, industrial, commercial, residential, and agriculture markets. Xylem has leading (top three) positions in highly fragmented markets. Xylem operates in modestly cyclical end markets due to the large installed base of products that generate a large percentage of revenue from MRO activity. In addition, significant portions of Xylem's revenue are funded by water tariffs or mandated by regulatory agencies (i.e., are not discretionary). Despite large (double-digit) declines in water utility capital spending in 2012-2013, Xylem has held revenue almost flat over that time, owing to the large installed base. We believe that as global economies improve and excess water infrastructure is worked off, Xylem will likely return to trend (5%-6%) growth in 2015.”

Xylem closed on Tuesday at $33.94.