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Why Is Pentair plc (PNR) Down 0.1% Since Last Earnings Report?

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Zacks Equity Research
·4 min read
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A month has gone by since the last earnings report for Pentair plc (PNR). Shares have lost about 0.1% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Pentair plc due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Pentair Earnings and Sales Surpass Estimates in Q4

Pentair reported fourth-quarter 2020 adjusted earnings per share of 70 cents, beating the Zacks Consensus Estimate of 63 cents. The bottom line also improved 3% from 68 cents reported in the prior-year quarter. The improvement can be attributed to ongoing strong demand in the residential focused businesses. Including one-time items, earnings were 60 cents compared with the prior-year quarter’s 61 cents.

Net sales improved 5% year over year to $796 million. Further, the top line surpassed the Zacks Consensus Estimate of $751 million. Excluding the impact of acquisitions, divestitures and currency translation, core sales rose 3% in the reported quarter.
 
Cost of sales advanced 6.5% year over year to $513 million. Gross profit in the reported quarter amounted to $284 million, up 3% from the prior-year quarter. Gross margin came in at 35.6% compared with the year-ago quarter’s 36.3%.

Selling, general and administrative expenses totaled $142 million compared with $134 million in the prior-year quarter. Research and development expenses increased 13.6% year over year to $20 million. Adjusted segmental operating income remained flat year over year at $141 million.

Segmental Performance

Net sales in the Consumer Solutions segment rose 10% year over year to $482 million. The segment’s operating earnings increased 9% year over year to $124 million.

Net sales in the Industrial and Flow Technologies segment totaled $314 million, down 0.6% from the prior-year quarter. Operating earnings for the segment slumped 22% year over year to $33 million.

Financial Update

Pentair had cash and cash equivalents of $82.1 million as of Dec 21, 2020 compared with $82.5 million as of Dec 31, 2019. Net cash from operating activities was around $574 million during 2020 compared with $345 million in the prior year. The company generated free cash flow of $512 million in 2020 compared with $295 million witnessed in the prior year. The company had long-term debt of $840 million as of Dec 31, 2020, down from $1,029 million as of Dec 31, 2019.

2020 Results

Pentair reported adjusted earnings per share of $2.50 in 2020, up 5% from the prior year’s $2.38. Earnings beat the Zacks Consensus Estimate of $2.44 and came ahead of management’s guidance of adjusted earnings per share between $2.35 and $2.40. Including one-time items, the bottom line was $2.13 compared with $2.12 in 2019.
 
Sales increased 2% year over year to $3.02 billion in fiscal 2020. The top line outpaced the Zacks Consensus Estimate of $2.97 billion.

Guidance

Expecting strength in its residential focused businesses to continue this year, Pentair anticipates adjusted earnings per share between $2.60 and $2.75 in 2021. Sales are expected to be up approximately 3-5% on a reported basis.

For first-quarter 2021, the company expects adjusted earnings per share between 55 cents and 63 cents. The company anticipates first-quarter sales to be up approximately 7-12% on a reported basis compared with the prior-year quarter.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month. The consensus estimate has shifted 6.4% due to these changes.

VGM Scores

At this time, Pentair plc has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Pentair plc has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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