first-quarter 2013 earnings per share of 7 cents beat the Zacks
Consensus Estimate by 16.7% but were 12.5% lower than the
year-ago level. The year-over-year decline in the bottom
line was mainly due to muted top-line growth and lower gross
Net sales in the reported quarter increased only 2% year over
year to $370.4 million, ahead of the Zacks Consensus Estimate of
$364.0 million. Tough year-over-year comparisons due to record
warm temperatures across the Northeast and Midwest in the
year-ago period led to the subdued improvement in sales.
Unfavorable weather, fewer selling days and an overall tough
economy resulted in a 15% sales decline in Europe.
Sales on the irrigation side of the business increased 14%
owing to the gradual recovery of the housing market in some of
the key regions.
Gross profit was flat at $104.8 million but gross margin fell
60 basis points (bps) to 28.3% due to competitive pricing
pressure and an adverse product mix.
Operating income in the quarter increased 15% to $6.9 million
and operating margin rose 20 bps to 1.9% owing to lower operating
For 2013, management reiterated its expectation for earnings per
share in the range of $2.13−$2.23 per share, up 15%−20% from its
adjusted 2012 EPS. Sales growth for 2013 is expected to be in the
range of 5%-7%. Pool projects modest inflationary expense for the
rest of the year. Management anticipates increase in share
repurchases during the balance of the year.
Despite tough weather comparisons, Pool delivered a
better-than-expected quarter. Pool also appears to hold promise
over the longer term. Some commendable attributes like a steady
turnaround of the irrigation side of business, which was once
struggling, and overall market share gains will help drive the
company's business ahead.
Pool's business is susceptible to changes in weather.
Normally, sales are mostly benefited by weather conditions in the
second quarter of a calendar year. Hence, with the company
stepping into the second quarter, which is seasonally the
strongest, Pool is likely to perform better in the near
Pool currently holds a Zacks Rank #2 (Buy). Some companies
from the leisure and recreational products sector that are worth
a look include
Smith & Wesson Holding Corp.
Sturm, Ruger & Co. Inc.
Polaris Industries Inc.
). While Smith & Wesson and Strurm, Roger hold a Zacks Rank
#1 (Strong Buy). Polaris carries a Zacks Rank #2 (Buy).
POLARIS INDUS (PII): 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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