Can Pentair (PNR) Beat Q3 Earnings on Segmental Growth?

Pentair plcPNR is scheduled to report third-quarter 2017 results before the opening bell on Oct 24. The company's revenues and earnings are anticipated to be up year over year in this quarter, driven by bright prospects for both Water and Electrical businesses.

Last quarter, the company's adjusted earnings came in line with the Zacks Consensus Estimate. The company's earnings have surpassed estimates in the trailing four quarters, with an average positive earnings surprise of 5.07%.

Let's see how things are shaping up for Q3 earnings.

Pentair PLC. Price and EPS Surprise

Pentair PLC. Price and EPS Surprise | Pentair PLC. Quote

Factors at Play

Pentair expects adjusted core sales to grow approximately 4% for the third quarter. According to our latest consensus estimates, Pentair is projected to post revenues of $1.23 billion in the third quarter, reflecting a year-over-year growth of 1.2%.

Pentair's Water segment, which generates around 60% of the company's revenues, will grow on improving end-market demand in the municipal water market. Further, buoyancy in the Residential and Irrigation business will drive the segment's growth in the quarter to be reported despite weakness prevalent in the Engineered Pump business. Our consensus estimates indicate that net sales of Pentair's Water segment will reach $684 million in the quarter.

Mid-single digit growth witnessed in the Industrial business for two straight quarters quarter drove sales growth in the Electrical segment in the second quarter. This momentum is expected to carry into the third quarter as well. The Commercial business will also grow led by its continued focus on reducing the infrastructure volatility. The Zacks Consensus Estimate for sales for the Electrical segment is pegged at $542 million for the third quarter.

Moreover, Pentair's pricing actions will help mitigate higher inflation. Investors will also want to keep an eye on Pentair's plan to spin-off its Electrical business in order to create two industry-leading, pure-play companies - one in Water and the other in Electrical. The company will incur some incremental redundant corporate costs regarding the spin-off, which will hurt third-quarter earnings.

The Zacks Consensus Estimate for earnings has edged down 1.1% over the last 90 days and is currently pegged at 93 cents. Nevertheless, the earnings estimate reflects a 19% year-over-year growth and is at the higher end of the Pentair's third-quarter guidance range of 91-93 cents. The mid-point of the company's guided range reflects an 18% year-over-year growth.

Also, the company's price performance has not been impressive. Its shares have gained 18.4% in a year's time, underperforming the 32.6% rally of the industry it belongs to.

Currently, Pentair carries a Zacks Rank #3 (Hold).

Stocks Worth a Look

Here are a few stocks in the industrial products sector worth considering as these have the right combination of elements to post an earnings beat this quarter.

Altra Industrial Motion Corp. AIMC is scheduled to report quarterly numbers on Oct 20. It has an Earnings ESP of +5.76% and carries a Zacks Rank of 2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

A. O. Smith Corporation AOS also has a Zacks Rank of 2 and its Earnings ESP is +0.11%. The company is slated to release third-quarter results on Oct 25.

Caterpillar Inc. CAT has an Earnings ESP of +1.27% and carries a Zacks Rank #2. It is scheduled to release earnings on Oct 24.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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