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Pentair (PNR) to Report Q2 Earnings: What's in the Offing?

Zacks Equity Research

Pentair plc PNR is slated to report second-quarter 2019 results on Jul 23, before the opening bell. The company’s earnings surpassed estimates in the trailing four quarters, the average being 2.11%.

Which Way Are Estimates Treading?

The Zacks Consensus Estimate for second-quarter revenues is pegged at $760 million, indicating an improvement of 1.24% from the year-ago quarter. The same for earnings stands at 65 cents, suggesting a decline of 8.45% from the prior-year reported figure.

Pentair plc Price and EPS Surprise

Pentair plc Price and EPS Surprise

Pentair plc price-eps-surprise | Pentair plc Quote

The company has been witnessing downward revisions of late. The Zacks Consensus Estimate for the company’s earnings in second quarter has declined 2% to 65 cents per share in the past 30 days.

Shares of the company have declined 12% in a year, against the industry’s growth of 13.4%. Will the upcoming earnings release provide a boost to Pentair’s stock? Let’s take a look.

Factors to Influence Q2 Results

Wet and cold weather delayed pool construction activity in several of Pentair’s key markets during the first quarter of 2019. The company also witnessed sluggish growth in several of its end markets, primarily in the Filtration Solutions’ end markets in Europe. The inclement weather also affected the higher margin specialty agriculture spray business within the Flow Technologies segment as several parts of the country were flooded in turn delaying the planting season. As a result of slower sell-through during the quarter, inventory levels have not gone down as expected.  Consequently, the second quarter results are likely to be impacted. Further, the company continues to witness inflation in material and other costs which include the impact of tariffs.

Unfavorable foreign currency impact will have a dampening effect on to-be-reported quarter’s results. However, recent acquisitions will aid growth. Notably, Pentair has undergone certain business restructuring initiatives aimed at reducing fixed cost structure and commenced business realignment, which will contribute to margins in the second quarter of 2019. Further, productivity improvement and price hikes implemented to combat higher input costs will also aid the upcoming quarterly results.

Pentair’s projects second-quarter 2019 adjusted earnings per share guidance at 63-66 cents. The company had reported adjusted earnings per share of 71 cents in the second quarter of 2018. Sales in the quarter are anticipated to increase 1-2% on a reported basis and approximately flat to up 1% on a core basis compared with the prior-year quarter.

Expectations from Segmental Performance

The Zacks Consensus Estimate for the Aquatic Systems segment’s revenues iscurrently pegged at $272 million, suggesting a decline of 2% year over year. The segment’s operating profit for the quarter is projected to slip 3% year over year to $77 million.

The Filtration Solutionssegment revenues will likely go up 6% year over year to $277 million in the to-be-reported quarter. The segment’ operating profit is estimated at $54 million for the April-June quarter, indicating an improvement of 3% from the $52 million reported a year ago.

The Zacks Consensus Estimate for the Flow Technologies segment’s revenues is pegged at $240 million for the quarter to be reported, likely to be marginally down from the year-ago quarter’s $242 million. This segment is expected to report an operating income of $38 million in the quarter compared with the $44 million in the prior-year quarter.

Earnings Whispers

Our proven model does not show that Pentair is likely to beat earnings estimates this quarter. This is because a stock needs to have both — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Pentair’s Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is -5.20%.

Zacks Rank: Pentair currently carries a Zacks Rank #3.

We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks Poised to Beat Earnings Estimates

Here are a few Industrial Products stocks which you may consider as our model shows that these have the right combination of elements to post an earnings beat in their upcoming releases:

Jon Bean Technologies Corporation JBT has an Earnings ESP of +1.85% and a Zacks Rank of 1. The stock has appreciated 34% over the past year. You can seethe complete list of today’s Zacks #1 Rank stocks here.

AptarGroup, Inc. ATR has a Zacks Rank #2 and an Earnings ESP of +0.88%. The stock has gained 30% over the past year.

Avery Dennison Corporation AVY, a Zacks Ranked #2 stock, has an Earnings ESP of +0.06%. The stock has moved up 11% in a year’s time.

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