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Reasons to Hold Pentair (PNR) Stock in Your Portfolio Now

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·5 min read
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  • PNR
  • SITE
  • SCSC

Pentair plc PNR has been benefiting from strong demand in its residential focused businesses. Activity in industrial and commercial businesses continues to pick up and demand for pool maintenance remains strong. Focus on expanding digital transformation, innovation, technology and brand building, and making acquisitions in the areas of pool and residential and commercial water treatment remain key catalysts. Its ongoing transformation program to accelerate growth and drive margin expansion is expected to yield results in the long haul.

Shares of Pentair have gained 43.5% in the past year compared with the industry’s rally of 58.7%.

Zacks Investment Research
Zacks Investment Research

Image Source: Zacks Investment Research

The company currently has a Zacks Rank #3 (Hold) and a VGM Score of B. Our research shows that stocks with a VGM Score of A or B combined with a Zacks Rank #1 (Strong Buy) 2 (Buy) or 3 offer the best investment opportunities. You can see the complete list of today’s Zacks #1 Rank stocks here.

Let’s take a look into the factors that make this stock worth holding on to.

Strong Q3 Results & Record Backlog: Pentair reported third-quarter 2021 adjusted earnings per share of 89 cents, which not only beat the Zacks Consensus Estimate of 80 cents but also its guidance of earnings per share in the range of 81 cents to 85 cents. The bottom line improved 27% year over year driven by strong order levels. The company ended the quarter with record backlog levels.

Upbeat Outlook for 2021: Backed by the trend in orders and record backlog, Pentair expects earnings per share in 2021 between $3.34 and $3.40. The mid-point of the range indicates year-over-year growth of 35%. Sales growth for the year is projected at approximately 22% to 23% on a reported basis. Pentair’s productivity improvement efforts and price increases implemented to counter the impact of cost inflation are likely to aid margins. Segment income guidance is expected to be up approximately 32% to 34%.

Positive Earnings Surprise History: Pentair has outpaced the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average surprise being 13.7%.

Healthy Growth Prospects: The Zacks Consensus Estimate for earnings per share for fiscal 2021 is currently pegged at $3.39, suggesting year-over-year growth of 35.6%. For fiscal 2022, the consensus mark for earnings stands at $3.79, indicating year-over-year improvement of 11.6%. The stock has an estimated long-term earnings growth rate of 14.7%.

Growth Drivers in Place

Pentair gained from the strong demand for swimming pools witnessed during the pandemic last year as consumers stayed home and invested in their backyards. The momentum continues this year as well with consumers continuing to enhance their at-home quality of life by investing in pools. Several builders are reporting backlogs into the second half of next year. Apart from pool construction, demand for pool maintenance remains strong. With nearly 80% of the Consumer Solutions segment serving residential markets, this trend bodes well for the segment.

In the first quarter of 2021, Industrial & Flow Technologies segment returned to growth for the first time in five quarters aided by strong performance in residential and recovery in commercial and industrial businesses. This segment has been performing well since.

During second-quarter 2021, Pentair launched a Transformation program to accelerate growth and drive margin expansion. It is expected to drive operational efficiency, streamline processes, and reduce complexity while meeting financial objectives. It will also be utilizing automation to increase productivity. Pentair is projecting at least 300 basis points of margin expansion by 2025 through the program.

Pentair has been investing in digital transformation, innovation and technology and acquisitions in the high-growth areas of pool and residential and commercial water treatment, which is commendable. In 2019, Pentair acquired Aquion, Inc. and Pelican Water Systems. Aquion offers a diverse line of products for the residential and commercial water treatment industry. Pelican provides residential whole home water treatment. In December 2020, the company completed the buyout of Rocean in a bid to expand its core water treatment solutions in the residential and commercial water business. In May 2020, Pentair completed the buyout of assets of Ken’s Beverage, Inc, which provides the company a valuable national direct service network to expand its commercial water treatment business. It has recently bought Pleatco, which not only adds strong aftermarket filtration products to its flagship Pool business but also to the Industrial Filtration business.

Stocks to Consider

Some better-ranked stocks in the Industrial Products sector are A. O. Smith Corporation AOS, ScanSource, Inc. SCSC and SiteOne Landscape Supply SITE. All of these stocks carry a Zacks Rank #2, at present.

A. O. Smith has an expected earnings growth rate of around 35% for the current year. The Zacks Consensus Estimate for current-year earnings has been revised upward by 1% in the past 30 days.

A. O. Smith’s shares have surged 44% in the past year. The company has a trailing four-quarters earnings surprise of 16.8%, on average.

ScanSource has a projected earnings growth rate of around 19% for 2021. The Zacks Consensus Estimate for current-year earnings has been revised upward by 1% in the past 30 days.

The company’s shares have appreciated 22% in a year. ScanSource has a trailing four-quarter earnings surprise of 34.6%, on average.

SiteOne Landscape has an estimated earnings growth rate of around 77.2% for the current year. In the past 30 days, the Zacks Consensus Estimate for current-year earnings has been revised upward by 14%.

The company’s shares have increased 75% in the past year. SiteOne Landscape has a trailing four-quarter earnings surprise of 130.9%, on average.


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Pentair plc (PNR) : Free Stock Analysis Report

A. O. Smith Corporation (AOS) : Free Stock Analysis Report

ScanSource, Inc. (SCSC) : Free Stock Analysis Report

SiteOne Landscape Supply, Inc. (SITE) : Free Stock Analysis Report

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