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Pentair (PNR) to Buy Pleatco, Eyes Growth in Water & Air Filtration

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Pentair Plc PNR has entered into an agreement to buy Pleatco for $255 million in cash, in an effort to expand its footprint in the aftermarket water and air filtration space.

Based in Louisville, KY, Pleatco manufactures water filtration and clean air technologies that are focused on serving the spa, pool and industrial air customers’ aftermarket needs. The company is a subsidiary of Align Capital Partners.

The latest collaboration expands Pentair’s range of replacement filter products offering, which will be sold through its existing pool and spa distribution channels as well as Pleatco’s distribution channels. The buyout also enhances Pentair’s Industrial Filtration portfolio with an addition of air filtration products to serve its industrial customers.

The deal is expected to close in the fourth quarter this year and will likely be accretive in its first full year. Pentair expects that Pleatco will generate annual revenues of around $95 million in the current year.

Pentair’s pool business has been benefiting from increased demand for swimming pools as consumers were forced to stay indoors amid the pandemic. The pool business witnessed an improvement of slightly above 15% in 2020 and an impressive growth of 50% in the first half of 2021. The demand for new pools has been robust this year as well, as consumers are continuing to enhance their at-home quality of life by investing in pools.

Pentair is focused on expanding in the areas of pool, and residential and commercial water treatment through acquisitions. Last December, Pentair acquired Rocean to expand its core water treatment solutions in the residential and commercial water business. This May, Pentair bought the assets of Ken’s Beverage, Inc, which provides the company a valuable national direct service network to expand its commercial water treatment business. In 2019, the company took over Aquion, Inc. and Pelican Water Systems. Aquion offers a diverse line of water conditioners, water filters, drinking-water purifiers, ozone and ultraviolet disinfection systems, reverse osmosis systems, and acid neutralizers for the residential and commercial water treatment industry. Pelican provides residential whole-home water treatment systems. These acquisitions have opened up solid growth opportunities for Pentair.

During the second-quarter earnings call, Pentair hiked the 2021 adjusted earnings per share guidance to the range of $3.30 to $3.40 from its previous guidance of $3.10 to $3.20. The mid-point of the new range indicates year-over-year growth of 34%. Sales growth for the year is projected at approximately 21-23% on a reported basis, higher than 17-19% growth projected earlier.

Price Performance

The company’s shares have gained 47.9% so far this year, outperforming the industry’s growth of 46%.

Zacks Investment Research
Zacks Investment Research

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Zacks Rank & Stocks to Consider

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

Better-ranked stocks in the Industrial Products sector include Encore Wire Corporation WIRE, Deere & Company DE and Lincoln Electric Holdings, Inc. LECO. While Encore Wire sports a Zacks Rank #1 (Strong Buy), Deere & Lincoln Electric carry a Zacks Rank #2 (Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Encore Wire has a projected earnings growth rate of 332.6% for fiscal 2021. So far this year, the company’s shares have gained 45%.

Deere has an estimated earnings growth rate of 117.5% for fiscal 2021. The company’s shares have rallied 36.3%, so far this year.

Lincoln Electric has an expected earnings growth rate of 45.1% for 2021. The stock has appreciated 22%, year to date.

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Lincoln Electric Holdings, Inc. (LECO) : Free Stock Analysis Report

Pentair plc (PNR) : Free Stock Analysis Report

Encore Wire Corporation (WIRE) : Free Stock Analysis Report

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