Pentair (PNR) Q2 Earnings Beat Estimates, 2023 View Raised
Pentair plc PNR has reported second-quarter 2023 adjusted earnings per share of $1.03, beating the Zacks Consensus Estimate of adjusted earnings per share of 95 cents. The bottom-line figure surpassed the company’s guidance of 94-96 cents per share. Earnings improved 1% from $1.05 per share reported in the prior-year quarter.
Results were aided by the company’s transformation initiatives, improved performances in the Industrial and Flow Technologies and Water Solutions segments. This was offset by the weak performance of the Pool segment reflecting lower demand in new pools and the ongoing channel inventory correction.
Including one-time items, earnings per share was 93 cents, compared with the prior-year quarter’s earnings of 92 cents per share.
Net sales improved 2% year over year to $1.08 billion and outpaced the Zacks Consensus Estimate of $1.06 billion. The volume declines in the Pool segment, reflecting the weak demand, were offset by improved volumes in Industrial and Flow Technologies and Water Solutions segments.
Excluding the impacts of acquisitions, divestitures and currency translation, core sales fell 7% in the reported quarter. The figure, which was worse than the 4.3% decline in core sales projected in our model, was mainly dragged down by the weaker-than-expected performance of the pool business. We had factored in a 10.2% drop in overall volumes, which was expected to be offset by 5.9% growth in price.
Pentair plc Price, Consensus and EPS Surprise
Pentair plc price-consensus-eps-surprise-chart | Pentair plc Quote
The cost of sales declined 3% year over year to $683 million. The gross profit in the reported quarter amounted to $399.5 million, up 11% from the prior-year quarter. The gross margin was 36.9%, compared with the year-ago quarter’s figure of 33.8%.
Selling, general and administrative expenses totaled $165 million, up 13% from the prior-year quarter’s figure of $146 million. Research and development expenses increased 12% year over year to $26 million.
Operating income in the quarter was $209 million, up 9% year over year. The adjusted segment operating income increased 14% year over year to $234 million. The segmental margin was 21.6% in the reported quarter, up from the year-ago quarter’s figure of 19.3%.
Segment Performances
Net sales in the Industrial and Flow Technologies segment totaled $412 million, up 9.1% from the prior-year quarter. Core sales grew 9% in the quarter under review. The figure was higher than our estimate of $390.1 million for the quarter. Operating earnings for the segment rose 27% year over year to $75 million. Our estimate for the segment’s operating profit was $67 million.
Net sales in the Water Solutions segment surged 51% year over year to $336 million. Core sales were up 9% in the quarter. Our estimate for the segment’s net sales was $299.7 million for the quarter. The segment’s earnings were $75 million, compared with $33 million reported in the year-ago quarter. The figure was higher than our estimate of $44 million.
Net sales in the Pool segment totaled $334 million in the quarter. Total sales and core sales were down 28% from the prior-year quarter. The revenue figure came in lower than our estimate of $364.4 million for the segment. Operating earnings for the segment fell 23% year over year to $105 million. Our estimate for the segment’s operating income was $124 million.
Financial Update
Pentair had cash and cash equivalents of $142 million as of Jun 30, 2023, compared with $109 million as of Dec 31, 2022. Net cash flow provided from operating activities was around $340 million in the first half of 2023, compared with an inflow of $176 million in the prior-year comparable period. The company had a long-term debt of $2.11 billion as of Jun 30, 2023, down from $2.32 million as of Dec 31, 2022.
Guidance
Backed by the upbeat results in the first half of 2023, Pentair now expects adjusted earnings per share in the range of $3.65 to $3.75, higher than its previous guidance of $3.60-$3.70 for 2023. Sales growth for the year is expected to be down 2% to flat on a reported basis. PNR anticipates the weakness in the Pool segment to continue this year.
For the third quarter of 2023, the company expects adjusted earnings per share of 84-89 cents. Pentair anticipates current-quarter sales to be down 7% from the prior-year period’s reported figure.
Price Performance
Pentair’s stock has gained 35.6% over the past year, compared with the industry’s 4% growth.
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Zacks Rank and Stocks to Consider
Pentair currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks from the Industrial Products sector are Worthington Industries, Inc. WOR, The Manitowoc Company, Inc. MTW, and W.W. Grainger, Inc. GWW. WOR and MTW sport a Zacks Rank #1 (Strong Buy) at present and GWW has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Worthington Industries has an average trailing four-quarter earnings surprise of 14.9%. The Zacks Consensus Estimate for WOR’s fiscal 2023 earnings is pegged at $5.65 per share. The consensus estimate for 2023 earnings has moved 22.6% north in the past 60 days. Its shares have gained 52% in the last year.
Manitowoc has an average trailing four-quarter earnings surprise of 256.3%. The Zacks Consensus Estimate for MTW’s 2023 earnings is pegged at $1.12 per share. The consensus estimate for 2023 earnings has moved 7.8% north in the past 60 days. MTW’s shares have gained 58% in the last year.
The Zacks Consensus Estimate for Grainger’s 2023 earnings per share is pegged at $35.86, up 1% in the past 60 days. It has a trailing four-quarter average earnings surprise of 9.1%. GWW gained 56% in the last year.
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