We maintain our Neutral recommendation on
) based on weak seasonality and a cautious outlook for the fourth
quarter and full year 2013. The company is expected to post its
full year results in the second week of Feb 2014.
The company has shown improvement after remaining sluggish for
some time owing to the housing market recovery. In Oct 2013, Pool
delivered mixed third-quarter 2013 results, missing the Zacks
Consensus Estimate for earnings by 6.9% but beating the same for
revenues by 1.1%. Both earnings and revenues grew year over year.
Following the mixed results, estimates for 2013 remained
unchanged, while one estimate for 2014 moved up over the last 60
Currently, the company expects the earnings momentum to remain
sluggish as the company has fully utilized industry capacity. In
fact, the company lowered its earnings guidance twice during 2013
in the wake of inclement weather in North America and Europe.
Moreover, going forward, we expect weak seasonality to adversely
affect fourth quarter revenues as sales are generally weak in the
fourth quarter of the year.
However, the company's long-term sound fundamentals offset these
negatives to some extent. The presence of a limited number of
vendors and a large number of dealers in the swimming pool
industry gives the company a significant advantage as a
distributor and offers scope for market share growth. Although
rebound in consumer spending remains slow, the company remains
well positioned to take advantage of market recovery and
long-term growth opportunities in the industry. Moreover, we
believe that maintenance of pools ensure a recurring revenue
stream for the company even during the economic downturn.
Other Stocks to Consider
The company presently has a short-term Zacks Rank #2 (Buy). Other
players in the retail industry, which look attractive at current
Smith & Wesson Holding Corporation
Sturm, Ruger & Co. Inc.
Arctic Cat Inc.
). While Smith & Wesson Holding and Sturm, Ruger & Co.
hold a Zacks Rank #1 (Strong Buy), Arctic Cat carries a Zacks
Rank #2 (Buy).
ARCTIC CAT INC (ACAT): Free Stock Analysis
POOL CORP (POOL): Free Stock Analysis Report
STURM RUGER&CO (RGR): Free Stock Analysis
SMITH & WESSON (SWHC): Free Stock Analysis
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