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Pool Corp (POOL) Shares Rally 31% YTD: More Room to Run?

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Pool Corporation POOL is poised to benefit from its remodel and replacement activities as well as robust base business. This along with focus on focus on customer experience and expansion plans bodes well.

So far this year, shares of Pool Corp have gained 30.5% against the industry’s decline of 8.7%. The price performance was backed by solid earnings surprise history. Pool Corp’s earnings surpassed the Zacks Consensus Estimate in all of the trailing four quarters. Earnings estimates for 2021 and 2022 have moved up 14.9% and 9.7%, respectively, in the past 30 days. This positive trend signifies bullish analysts’ sentiments and justifies the company’s Zacks Rank #1 (Strong Buy), indicating robust fundamentals and the expectation of outperformance in the near term. You can see the complete list of today’s Zacks #1 Rank stocks here.

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Zacks Investment Research

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Factors Driving Growth

Focus on Remodeling & Replacement Activities: Pool Corp continues to benefit from the company’s remodeling and replacement activities. During second-quarter 2021, building materials sales increased 33% year over year following growth rates of 34% (as of first-quarter 2021), 42% (as of fourth-quarter 2020) and 29% (as of third-quarter 2020). The company is benefitting from strong demand in construction and remodel markets. Equipment and chemical sales increased 35% and 28% year over year, respectively, in the second quarter. The upside was primarily driven by solid demand for heaters, pumps, filters, lighting, automation and pool remodeling. Chemical sales benefitted from increased dichlor and trichlor product pricing. Going Forward, the company believes that the flexibility of the new work-from-home norm is likely to act as a catalyst for investments in home improvements. Also, benefits from new products (such as automation and the connected pool), continuation of the de-urbanization trends along with the strengthening of the southern migration are likely.

Solid Base Business: The company has been benefitting from the solid performance of its base business segment. In second-quarter 2021, the company’s base business segment contributed 94.4% to total revenues. During the quarter, revenues from base business increased 31.9% year over year to $1,687.7 million. In the previous four quarters, revenues from base business increased 50.7% (as of first quarter 2021), 39% (fourth quarter 2020), 27% (third quarter 2020), 14% (second quarter 2020) on a year-over-year basis.

Expansion Efforts: Pool Corp continues to focus on expansion initiatives to boost revenues. Notably, the company is foraying into newer geographic locations to expand in existing markets and launch innovative product categories to boost market share. It is also trying to expand through various acquisitions. In this regard, the company is assimilating the TWC Distributors acquisition, thereby expanding the Florida market with nine additional sales centres. Moreover, the company expanded its Horizon network in Florida and California markets. Also, the company continues to make progress with organic growth greenfield expansion and acquisitions. Notably, the acquisitions along with the new locations are likely to boost customer relationship and services, thereby enhancing the top line.

Upbeat Views: Given the company’s ability to drive organic growth and manage cost structure through execution and capacity creation, the company raised its guidance for 2021. Pool Corp anticipates 2021 earnings per share in the range of $13.75-$14.25, up from the prior estimate of $11.85-$12.60. Notably, the company anticipates robust demand to continue backed by strong single-family housing market, new product launches as well as increased maintenance and repair activities.

Other Key Picks

Other top-ranked stocks in the same space include OneWater Marine Inc. ONEW, Clarus Corporation CLAR and Sturm, Ruger & Company, Inc. RGR, each sporting a Zacks Rank #1.

OneWater Marine has a trailing four-quarter earnings surprise of 194.5%, on average.

2021 earnings for Clarus and Sturm, Ruger & Company are expected to rise 64.3% and 69%, respectively.

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Pool Corporation (POOL) : Free Stock Analysis Report

Sturm, Ruger & Company, Inc. (RGR) : Free Stock Analysis Report

Clarus Corporation (CLAR) : Free Stock Analysis Report

OneWater Marine Inc. (ONEW) : Free Stock Analysis Report

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