Pool Corporation POOL reported better-than-expected fourth-quarter 2019 results. The bottom line beat the Zacks Consensus Estimate for the third consecutive quarter and the top line topped the same for the second straight quarter.
Adjusted earnings of 44 cents per share in the quarter topped the Zacks Consensus Estimate of 35 cents and increased 7.3% from the year-ago quarter’s tally. Quarterly net revenues totaled $582.2 million, which surpassed the consensus mark of $572.7 million and increased 7.2% year over year.
Revenue growth can be primarily attributed to robust performance of the company’s Base business, primarily driven by continuous expansion in commercial and building material products along with healthy demand for construction materials and products used in the remodel and replacement of in-ground pools.
Pool Corporation Price, Consensus and EPS Surprise
Pool Corporation price-consensus-eps-surprise-chart | Pool Corporation Quote
Let’s discuss the quarterly numbers.
Pool Corp reports operations under two segments — The Base Business segment (constituting majority of the business) and the Excluded segment (sale centers excluded from the base business).
Revenues in the Base Business segment increased 6.9% year over year to $575.8 million. Also, operating income moved up 3.8% to $27.4 million. However, operating margin contracted 10 basis points (bps) from the year-ago quarter’s number to 4.8%.
The Excluded segment delivered net revenues of $6.4 million, up from $4.5 million registered in the prior-year quarter. The segment reported operating loss of $1.6 million compared with the year-ago quarter’s loss of $0.4 million.
Operating Highlights & Expenses
Cost of sales in the fourth quarter increased 9.8% from the prior-year quarter’s figure. Gross profit, as a percentage of net sales, declined 170 basis points (bps) to 27.8% from the year-ago quarter’s figure.
Operating income dropped 0.7% year over year to $25.8 million. Also, the operating margin declined 40 bps to 4.4% from the prior-year quarter’s level. Selling and administrative expenses inched up 1.3% year over year. Net income totaled $18 million, up from $16.8 million recorded in the year-ago quarter.
As of Dec 31, 2019, Pool Corp’s cash and cash equivalents amounted to $28.6 million compared with $16.4 million on Dec 31, 2018. Total net receivables, including pledged receivables, rose 9% and inventory levels rose 4% year over year. Its net long-term debt amounted to $499.7 million, down 24% from the prior-year quarter’s level. Goodwill increased to $188.6 million compared with $188.5 million reported in the prior-year quarter.
In 2019, net sales amounted to $3.2 billion, up 6.7% year over year.
Adjusted earnings per share (EPS) for the year ended Dec 31, 2019 was reported at $5.83 compared with $5.26 in 2018.
Operating margin increased 20 bps to 10.7% for the year ended Dec 31, 2019, compared with 10.5% reported in 2018.
For 2020, Pool Corp expects EPS in the range of $6.47-$6.77 compared with the prior guidance of $6.41-$6.71. The Zacks Consensus Estimate for current-year earnings is pegged at $6.64.
Zacks Rank & Key Picks
Pool Corp currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Some better-ranked stocks in the same space include Vista Outdoor Inc. VSTO, YETI Holdings, Inc. YETI and Acushnet Holdings Corp. GOLF. Vista Outdoor and YETI Holdings sport a Zacks Rank #1, while Acushnet Holdings carries a Zacks Rank #2 (Buy).
Vista Outdoor has trailing four-quarter positive earnings surprise of 23.1%, on average. The company’s earnings beat estimates in two of the last four quarters.
YETI Holdings has three-five year expected EPS growth rate of 17.2%.
Acushnet Holdings 2020 earnings is expected to rise nearly 6%.
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