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Pentair (PNR) Beats on Q4 Earnings; Sales Miss Estimates

Zacks Equity Research

Pentair plc PNR reported fourth-quarter 2016 adjusted earnings of 78 cents per share, a 11.4% decline from 88 cents in the year-ago quarter. Earnings, however, beat the Zacks Consensus Estimate of 73 cents.

Including one-time items, the company reported earnings of 60 cents per share, up 3.4% from 58 cents in the year-ago quarter.

Net sales decreased 8% year over year to $1.118 billion and also fell short of the Zacks Consensus Estimate of $1.21 billion. Excluding the unfavorable impact of currency translation, core sales declined 7%.

Pentair PLC. Price, Consensus and EPS Surprise

 

Pentair PLC. Price, Consensus and EPS Surprise | Pentair PLC. Quote

Cost of sales fell 12.7% to $748 million in the quarter from $856.5 million in the year-ago quarter. Gross profit in the reported quarter was $440 million, up 1.7% from $432.5 million in the prior-year quarter. Gross margin expanded 340 basis points (bps) year over year to 37% in the quarter.

Selling, general and administrative expenses climbed 7% year over year to $251 million. Research and development expenses rose 3% to $27 million. Adjusted operating income went down 11% to $204 million from $228 million in the year-ago quarter. Operating margin contracted 50 bps to 17.2%.

Segmental Performance

Sales from the Water Quality Systems segment inched up 1.7% year over year to $371 million. Operating earnings increased 2.5% to $83 million.

The Flow & Filtration Solutions segment reported revenues of $314 million, down 11.3% from the year-earlier quarter. Segment operating earnings were down 10.6% year over year to $36.2 million.

Revenues in the Technical Solutions segment fell 11.7% to $507 million. Operating earnings declined 20.8% year over year to $103 million.

Financial Update

At the end of 2016, Pentair had cash and cash equivalents of $238.5 million, up from $126 million at the end of 2015. Cash flow from operations came in at $702 million in 2016 compared with $597.7 million in 2015.

Free cash flow from continuing operations for full-year 2016 was $609 million compared with $511 million in 2015. Pentair paid dividends of 34 cents per share in fourth-quarter 2016. In Dec 2016, Pentair approved a 3% hike in the annual cash dividend rate for 2017 to $1.38.  

2016 Performance

Pentair reported adjusted earnings per share of $3.05 in 2016, down 7.8% from $2.83 per share recorded in the prior year. Earnings beat the Zacks Consensus Estimate by a penny. Including one-time items, the bottom line came in at $2.47, down 13.8% from $2.17 recorded in 2015.

Revenues grew 6% year over year to $4,890 million from $4,616 million in 2015. Revenues missed the Zacks Consensus Estimate of $5,093 million.

Guidance

Pentair initiated its 2017 guidance. The company expects adjusted EPS in the range of $3.45–$3.55 on the back of revenues of approximately $4.7 billion. It also guided first-quarter 2017 adjusted EPS of approximately 61 cents. The company projects first-quarter revenue to be approximately $1.14 billion, which would be down approximately 4% on a reported and core basis compared to first-quarter 2016 revenue.

Share Price Performance

In the last one year, Pentair has underperformed the Zacks classified Machinery-Thermal Products sub-industry with respect to price performance. The stock gained 30.3%, while the industry rose 41% over the same time frame.



 

Zacks Rank & Key Picks

Pentair currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the same sector are ABB Ltd ABB, Altra Industrial Motion Corp. AIMC and Apogee Enterprises, Inc. APOG.

ABB Ltd has delivered an average positive earnings surprise of 23.50% in the last four quarters. The company sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Altra Industrial Motion also boasts a Zacks Rank #1 and has delivered an average positive earnings surprise of 8.06% for the trailing four quarters. Apogee, another Zacks Rank #1 stock, has an average positive earnings surprise of 13.24% for the past four quarters.

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