Pool Corp.’s (POOL) fourth quarter 2011 loss per share of 21 cents bettered the Zacks Consensus Estimate of 22 cents loss per share and the year-ago loss of 24 cents. The outperformance was mainly driven by solid top-line growth. In fiscal 2011, earnings were $1.47 versus $1.15 in 2010.
Net sales in the reported quarter jumped 12% year over year to $270.4 million. Net sales for 2011 increased 11% year over year to $1.79 billion.
Inside the Headline Numbers
Overall Base business sales of Pool improved 10% year over year. Moreover, market share gains along with increases in replacement and construction activities contributed to the strong upside.
Blue business sales increased 10% in the quarter, while Green business sales were up 7.8%. Texas emerged as the biggest market for the company’s Blue business, with a robust 15.7% growth, followed by Arizona (14.3%), Florida (9.6%) and California (6.4%).
Gross profit grew 9.8% year over year to $80.8 million and gross margin fell 60 basis points (bps) to 29.9%, attributable to Pool’s pricing discipline coupled with improvements in sales trends.
Cash and cash equivalents increased substantially year over year to $17.5 million. Net receivables grew 9% from the prior-year period to $110.6 million attributable to an increase in current trade receivables as a result of December base business sales growth, higher vendor receivables and the impact from the reduction in the allowance for doubtful accounts.
The inventory level upped 11% year over year to $387.0 million at the end of the fourth quarter. Total debt outstanding was $247.3 million versus $198.7 million in the year-ago quarter.
For full-year 2012, management expects earnings per share in the range of $1.69–$1.79. Pool anticipates sales growth in the mid-to-upper single digits, including the impact from acquisitions and the opening of new locations in 2012.
The company reported better-than-expected results. Management realizes the opportunity to grow earnings per share over 20% per year for the next five years. They also anticipate modest growth in base business operating expense in the future. We are also supportive of management’s view and believe that the company is experiencing an uptrend, even in its Green business, which was once struggling.
However, the macro economy is yet to show definitive signs of recovery, which might restrict replacement, renovation and new construction in the near term. Management commented that the market will gradually improve beyond 2012. Pool, which competes with the likes of Johnson Outdoors Inc. (JOUT) and Golfsmith International Holdings Inc. (:GOLF), holds a Zacks #2 Rank (short-term Buy recommendation).Read the Full Research Report on POOL
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