Why Jefferies Thinks Xylem (XYL) Could Be Poised for a Catch-Up Rally

With short percentage of shares outstanding at 3.44%, Xylem Inc. (NYSE:XYL) is among the 7 Best HVAC Stocks to Buy for AI Server Heat Mitigation.

On June 25, Jefferies upgraded Xylem Inc. (NYSE:XYL) to Buy from Hold and raised its price target to $140 from $130. The firm noted that the stock has underperformed the broader industrial sector despite stable demand trends and improving margins. Jefferies believes that while industrial companies with direct exposure to data centers have experienced significant valuation expansion, Xylem has yet to fully reflect improving cyclical conditions. The firm also highlighted the company’s broad exposure across the entire water value chain and its recurring revenue base supported by long-term utility spending.

On June 8, Xylem Inc. (NYSE:XYL) announced a landmark agreement with Dow (DOW) to design, build, and operate advanced water systems at Dow’s large-scale industrial complex in Fort Saskatchewan, Alberta, Canada. The agreement expands the companies’ longstanding partnership and supports increased operations associated with Dow’s Path2Zero project. Under the contract, Xylem will provide a comprehensive solution encompassing engineering, system design, and long-term operations to ensure a reliable water supply, treatment, and reuse across the facility. The system is expected to become operational by August 2028.

Founded in 2011 and headquartered in Washington, D.C., Xylem Inc. (NYSE:XYL) is a global water technology company that designs, manufactures, and services equipment for water and wastewater applications. It provides high-efficiency pumps, heat exchangers, and closed-loop liquid cooling systems required to safely dissipate the extreme heat loads generated by dense AI servers in data centers.

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