On Jun 6, 2014, we issued an updated research report on
On Apr 17, the Louisiana-based wholesale distributor of swimming
pool supplies, equipment and related products announced mixed
first-quarter earnings. While the company missed the Zacks
Consensus Estimate for earnings by 10%, it beat the same for
revenues by 2.3%. However, both earnings and revenues grew year
We are encouraged by Pool's sound long-term fundamentals. 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 ample opportunity
for market share growth. Despite consumer spending continuing to be
low, the company remains well positioned to take advantage of the
overall 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 economic
downturn. We are also encouraged by the company's healthy capital
deployment initiatives, which will boost investors' confidence in
However, we remain aware of the weak housing market, which is
affecting the company's green business - construction and
installation of new pools and landscaping. Higher interest rates
have weakened net order trend in the housing market in the past 2-3
quarters compared with the first half of 2013 which in turn is
hurting demand for Pool's products and services.
We are also concerned about the seasonal nature of the company's
business. Although the company is poised to benefit from the
favourable weather trends in the upcoming quarters, inclement
weather at the end of the year might affect sales. Also,
unseasonably late warming trends in spring or early cooling trends
at the end of the year might impact the company's revenues.
Other Stocks to Consider
Pool currently carries a Zacks Rank #3 (Hold). Better-ranked stocks
in the same sector include
Malibu Boats, Inc.
Wesson Holding Corporation
), sporting a Zacks Rank #2 (Buy). However, in the broader leisure
and recreational services industry
Royal Caribbean Cruises Ltd.
) with a Zacks Rank #2 may also be considered.
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