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Pentair (PNR) to Report Q4 Earnings: What's in the Offing?

Zacks Equity Research

Pentair plc PNR is slated to report fourth-quarter 2018 results on Jan 29, before the market opens.

 

In the last reported quarter, Pentair reported an increase of 10% and 3% in earnings and revenues, respectively. The company beat the Zacks Consensus Estimate on both counts. Notably, the company has surpassed the Zacks Consensus Estimate in three of the trailing four quarters, recording average positive surprise of 2.93%.

 

Let’s see how things are shaping up prior to this announcement.

Pentair plc Price and EPS Surprise

 

Pentair plc Price and EPS Surprise

Pentair plc price-eps-surprise | Pentair plc Quote

Key Factors to Consider

 

Pentair projects sales to be around $736 million in the fourth quarter of 2018. This reflects 1-2% increase on a reported basis and 4-5% on a core basis compared with fourth-quarter 2017. The projections reflect the separation of its Electrical business on Apr 30, 2018. Healthy end markets are likely to aid results. 

 

All the segments are projected to report growth with the Aquatic Systems’ core sales expected to be up 10-12%. Core sales are expected to increase 1-2% in Filtration Solutions and 2-3% in Flow Technologies. Segment income is anticipated to be up approximately 6%, while ROS is expected to expand roughly 30 basis points. However, fluctuations in foreign currency exchange rates, most notably the strengthening of the U.S. dollar against the euro, could have an adverse material effect on the company’s revenues.

 

For the to-be-reported quarter, the Zacks Consensus Estimate for revenues is pegged at $736.5 million.  

 

During fiscal 2017 and the first nine months of fiscal 2018, Pentair underwent certain business restructuring initiatives aimed at reducing fixed cost structure and began realigning business. These actions will contribute to margin growth in the to-be-reported quarter. Pentair has also been facing inflation in material and other costs due to the impact of tariffs. The company has implemented price hikes to counter the impact of higher input costs. This along with productivity improvement is likely to aid earnings.

 

Pentair’s fourth-quarter 2018 adjusted earnings per share guidance is at 59 cents. If achieved, it would mark the fourth consecutive quarter of double-digit adjusted EPS growth. The Zacks Consensus Estimate for earnings for the quarter under review is currently pegged at 59 cents per share.

 

Share Price Performance

 

 

Shares of the company have plummeted 45% in a year, compared with the industry’s decline of roughly 18%.

 

Here’s What Our Quantitative Model Predicts

 

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 -0.19%. 

 

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 some companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:

 

HD Supply Holdings, Inc. HDS has an Earnings ESP of +1.50% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

 

Caterpillar Inc. CAT has an Earnings ESP of +0.30% and a Zacks Rank #3.

 

Dover Corporation DOV has an Earnings ESP of +0.93% and a Zacks Rank #3.

 

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