Pool's Q4 Loss In Line, Rev Beats


Pool Corp.’s (POOL) fourth quarter 2013 loss of 11 cents per share narrowed from the year-ago quarter loss of 17 cents per share and was in line with the Zacks Consensus Estimate. The narrower year-over-year loss could be attributed to higher sales and lower share count.

Net sales in the reported quarter increased 11.0% year over year to $340.8 million, ahead of the Zacks Consensus Estimate of $327.0 million by 4.2%. The upside reflects an 11.0% year-over-year increase in Base business sales.

Behind the Headline Numbers

Despite a 12.4% year-over-year increase in cost of sales, gross profit was up 7.7% due to higher sales. Operating loss during the quarter was $6.8 million, narrower than a loss of $10.3 million incurred during the year-ago quarter. However, selling and administrative expenses increased 3.4% year over year to $102.0 million due to higher base business expenses.

Full-Year Update

In 2013, adjusted earnings per share (EPS) were $2.05, up 19.9% year over year. Full year earnings beat the Zacks Consensus Estimate of $2.04 by a penny and were within management’s guidance range of $2.03 to $2.08.

Net sales increased 6.4% year over year to $2.08 billion, ahead of the Zacks Consensus Estimate of $2.07 billion by 0.68% driven by strong Base business sales. Base business sales grew 6.0%, including 6.0% growth on the swimming pool side of the business and 11.0% growth on the irrigation side. The top line was driven by market share gains and improvement in consumer discretionary spending, partially offset by declines in non-discretionary product sales, primarily in seasonal markets.

Guidance for 2014, Up Y/Y

For 2014, the company expects earnings per share in the range of $2.35—$2.45, representing growth of 15.0%-20.0% year over year. The Zacks Consensus Estimate of $2.39 lies within the company guided range. Driven by gradual recovery in consumer discretionary spending since 2010, the company expects sales to increase in the mid to upper single digit range. Gross profit is also expected to increase year over year.

The company expects costs to increase closer to a mid-single digit percentage range, higher than a 2.0% increase in 2013 due to opening of 7 to 10 new locations and an increase in compensation expense.

Share Repurchase

In Nov 2013, Pool authorized an additional stock repurchase program. Under this program, the company is authorized to repurchase up to $100.0 million of its common stock.

During the quarter, Pool bought back 0.8 million shares at an average price of $53.21. So far in 2014, Pool has repurchased 0.5 million shares, leaving shares worth $70.4 million available for further buyback.

Our Take

Though it posted a loss, Pool performed much better than the year-ago quarter. Pool’s business is susceptible to changes in weather. Normally, sales are higher in the second quarter of a calendar year due to favorable weather conditions whereas the fourth quarter is seasonally weaker owing to challenging external factors. Irrespective of that, the company posted improved results driven by the ongoing recovery in discretionary product sales.

Pool currently has a Zacks Rank #2 (Buy). Marine Products Corp. (MPX) is also worth considering in the same sector with a Zacks Rank #2.

Other leisure and recreation product companies such as, Sturm, Ruger & Co. Inc. (RGR) and West Marine Inc. (WMAR) are slated to report quarterly earnings soon. While Sturm, Ruger & Co. is expected to report its fourth quarter results on Feb 25, 2014, West Marine will report in the third week of the month.


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