Shares of diversified industrial manufacturing company, Pentair plc PNR, have been performing well of late. If you haven’t taken advantage of the share price appreciation yet, the time is right for you to add the stock to portfolio as it looks promising and is poised to carry the momentum ahead. The Zacks Rank #2 (Buy) stock has an estimated long-term earnings growth rate of 11.41%.
Estimates Moving Up
Earnings estimates for fiscal 2017 and 2018 for Pentair have moved up in the past 60 days, reflecting the optimistic outlook of analysts.
The estimate for fiscal 2017 has inched up 1% to $3.52, reflecting a year-over-year growth of 15.32%. The Zacks Consensus Estimate for earnings for fiscal 2018 has also moved north 2% to $3.90, a year-over-year growth of 10.93%.
Positive Earnings Surprise History
Pentair has an impressive earnings surprise history. The company has outpaced the Zacks Consensus Estimate in the trailing four quarters, delivering a positive average earnings surprise of 5.29%.
Ahead of the Industry
Year to date, Pentair has outperformed the Zacks classified Manufacturing –Thermal Products sub-industry with respect to price performance. The stock gained around 20.2%, while the industry recorded growth of 18.1%.
Upbeat Q1 & Guidance
Pentair reported first-quarter 2017 adjusted earnings of 65 cents per share, a 6.6% increase from the year-ago quarter. Earnings also beat the Zacks Consensus Estimate of 61 cents.
Pentair reaffirmed its full-year 2017 adjusted EPS guidance range of $3.45–$3.55. Compared with the year-ago earnings of $3.05, the mid-point of the guidance reflects a year-over-year growth of 15%. The company raised the outlook for full-year revenues to approximately $4.8 billion from the prior view of $4.7 billion. For 2017, the company expects that overall adjusted core sales to improve. Pentair also anticipates cash flow to be 100% of adjusted net income.
Growth Drivers in Place
Recently, Pentair announced that it will spin off its electrical unit, which manufactures enclosures and other products for electrical systems. Instead, the company wants to focus on core water treatment business, which makes treatment and processing systems. The separation will happen in the second quarter of 2018 and is expected to occur through a tax-free spin-off of Electrical by Pentair to its shareholders. Both the businesses will trade as two independent, publicly-traded companies. The companies will boast of market-leading positions in respective industries through renowned brands, attractive margin profiles, strong free cash flow generation and compelling growth opportunities.
Pentair’s Thermal business witnessed MRO growth in the first quarter for the first time in two years. This indicates solid prospects for this profitable part of the business. The company remains focused on making progress in building order channel. In its Electrical & Fastening Solutions business, Pentair is looking at additional price increases to help mitigate the cost inflation. After a challenging second-half 2016, the company’s Electrical segment’s order trends remain solid. The company also continues to record sound growth in the biogas business, which further showed signs of strengthening earlier this year on the back of the Union Engineering acquisition. Additionally, Pentair’s Aquatic & Environmental Systems is poised to grow on industry strength, continued dealer wins and diligent product innovations.
Other Stocks to Consider
Other top ranked stocks worth considering in the same sector are AGCO Corporation AGCO, Caterpillar, Inc. CAT and Deere & Company DE. All the three stocks flaunt a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
AGCO has an average positive earnings surprise of 40.39% in the trailing four quarters. Caterpillar generated an average positive earnings surprise of 40.25% in the past four quarters. Deere has an average positive earnings surprise of 9.89%.
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