Pentair Hits 52-Week High on Upbeat Guidance

Zacks Equity Research

Shares of Pentair Ltd. (PNR) attained a 52-week high of $73.47 and then closed at $72.83 on Dec 17 following the company’s announcement of its 2014 outlook and reaffirmation of fourth quarter and full year 2013 sales and earnings guidance.

For fiscal 2014, Pentair expects earnings per share to lie between $3.85 and $4.00. Compared to the mid point of 2013 guidance, this represents annual growth in the range of 20% to 25%. The Zacks Consensus Estimate is near the upper end of the guidance at $3.97, reflecting a 24.12% year-over-year increase.

The company forecasts sales at $7.7 billion for 2014, reflecting annual improvement of 4% over 2013 sales estimate. Pentair expects to continue generating free cash flow in excess of net income in 2014.

The fourth quarter 2013 guidance for earnings per share was reaffirmed at 83 cents to 85 cents. Compared to the adjusted 53 cents earned in the fourth quarter of 2012, the projected growth reflects 57% to 60% improvement. Fourth-quarter revenue is expected to be approximately $1.8 billion.

For fiscal 2013, Pentair expects to earn between $3.19 and $3.21 a share. The midpoint of the guidance reflects a 26% improvement from the adjusted earnings of $2.54 in 2012. The Zacks Consensus Estimate is near the upper end of the guidance at $3.20, reflecting a 33.74% increase from prior year. The company projects sales of $7.4 billion for 2013.

During the third quarter conference call on Oct 22, Pentair had narrowed its adjusted earnings per share guidance from $3.15 - $3.25 to $3.19 - $3.21 for the full-year 2013. The company had also lowered its sales outlook from $7.5 billion to $7.4 billion for 2013.

The company reaffirmed its fiscal 2015 EPS target of $5.00 and stated that it remains committed to its long-term growth strategies. Pentair raised its synergies target for 2015 to $310 million from $230 million.

The adoption of Pentair Integrated Management System (:PIMS) in the Flow Control businesses will help in margin expansion. Continued strength in the North American residential recovery and global food and beverage markets will continue to drive improved results. However, ongoing European weakness continues to act as a headwind for the company.

Pentair delivers industry-leading products, services and solutions for fulfilling customers’ diverse needs related to water and other fluids, thermal management and equipment protection. Pentair employs more than 30,000 people worldwide.

Pentair currently retains a short-term Zacks Rank #3 (Hold). Some better-ranked stocks in the same sector include Zebra Technologies Corp. (ZBRA), EnerSys (ENS) and Pioneer Power Solutions, Inc. (PPSI). All these stocks hold a Zacks Rank #1 (Strong Buy).

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