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Pentair (PNR) Q1 Earnings Beat Estimates, Hikes '21 Guidance

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Zacks Equity Research
·5 min read
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Pentair plc PNR reported first-quarter 2021 adjusted earnings per share of 81 cents, beating the Zacks Consensus Estimate of 61 cents. The bottom line also improved 56% from 52 cents reported in the prior-year quarter. The improvement can be attributed to ongoing strong demand in the residential focused businesses. The company has also been witnessing a recovery in its industrial and commercial businesses.

Including one-time items, earnings per share (EPS) were 78 cents compared with the prior-year quarter’s 43 cents.

Net sales improved 22% year over year to $866 million and surpassed the Zacks Consensus Estimate of $770 million. Excluding the impact of acquisitions, divestitures and currency translation, core sales rose 19% in the reported quarter.

Pentair plc Price, Consensus and EPS Surprise

Pentair plc Price, Consensus and EPS Surprise
Pentair plc Price, Consensus and EPS Surprise

Pentair plc price-consensus-eps-surprise-chart | Pentair plc Quote

Cost of sales advanced 20% year over year to $551 million. Gross profit in the reported quarter amounted to $315 million, up 25% from the prior-year quarter. Gross margin came in at 36.4% compared with the year-ago quarter’s 35.4%.

Selling, general and administrative expenses totaled $137 million compared with $132 million in the prior-year quarter. Research and development expenses increased 13.2% year over year to $21.5 million. Adjusted segmental operating income surged 47.4% year over year to $164 million. Segment margin was 19% in the reported quarter, indicating a 330 basis point expansion year over year.

Segmental Performance

Net sales in the Consumer Solutions segment rose 34% year over year to $521 million. The segment’s operating earnings climbed 54.5% year over year to $131 million.

Net sales in the Industrial and Flow Technologies segment totaled $344 million, up 7% from the prior-year quarter. Operating earnings for the segment increased 12% year over year to $50 million.

Financial Update

Pentair had cash and cash equivalents of $95 million as of Mar 31, 2021 compared with $82.1 million as of Dec 31, 2020. Net cash used in operating activities was around $19 million during the first quarter compared with $162.4 million in the prior-year quarter. The company had long-term debt of $932 million as of Mar 31, 2020, down from $840 million as of Dec 31, 2020.

Acquisitions

On Apr 20, 2021, Pentair announced that it has entered into a definitive agreement to acquire the assets of Ken’s Beverage, Inc., a provider of beverage equipment and service to commercial customers. The buyout will provide Pentair a full suite of services for commercial customers, and is in sync with its vision to be a leading residential and commercial water treatment company. Total consideration for the transaction is approximately $80 million in cash. The transaction, subject to customary closing conditions, is expected to be completed in second-quarter 2021. Earlier, Pentair completed the acquisition of Rocean in a bid to expand its core water treatment solutions in the residential and commercial water business.

Guidance

Backed by momentum in residential demand as pickup in industrial and commercial businesses, Pentair raised its 2021 guidance for adjusted EPS to a range of $2.80 and $2.95 from the prior guidance of $2.60 and $2.75. Sales are expected to be up approximately 6-11% on a reported basis.

For second-quarter 2021, the company expects adjusted earnings per share between 69 cents and 74 cents. The company anticipates first-quarter sales to be up approximately 13% to 16% on a reported basis compared with the prior-year quarter.

Price Performance

Pentair’s stock has appreciated 110.4% over the past year compared with the industry’s rally of 127.4%.

Zacks Rank and Stocks to Consider

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

Some better-ranked stocks in the Industrial Products sector include Deere & Company DE, Astec Industries, Inc. ASTE, and Dover Corporation DOV. While Deere and Astec sport a Zacks Rank of 1 (Strong Buy), Dover carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Deere has a projected earnings growth rate of 82.5% for fiscal 2021. Over the past year, the company’s shares have soared 174%.

Astec has an expected earnings growth rate of 14.3% for 2021. The stock has surged 112.5% in a year’s time.

Dover has an estimated earnings growth rate of 14.2% for the ongoing year. The company’s shares have gained 69% in the past year.

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