Technology

High Expenses to Affect Pool Corp (POOL) Earnings in Q1

Pool Corporation POOL is slated to report first-quarter 2019 results on Apr 18, before the opening bell.

While the company’s acquisitions and expansion are likely to have driven top-line growth in the to-be-reported quarter, increased expenses are likely to have dented earnings.

However, Pool Corp’s market-leading position offers a cost advantage, allowing it to generate higher return on investment than smaller companies. Further, its leadership position provides the scope to further benefit from the flourishing housing market, which continues to boost the demand for its products.

Notably, the company’s shares have gained 13.5% over the past year against the industry’s 10.1% decline.

 

Let us find out how the company’s top and bottom lines will shape up in the first quarter of 2019.

Top Line to Gain

In 2018, Pool Corporation’s net sales increased 7.5% year over year and the upside trend is likely to have continued in the first quarter as well. Subsequently, the Zacks Consensus Estimate for revenues in the first quarter is pegged at $612.2 million, reflecting a 4.5% increase from the year-ago quarter.

The company’s revenues derive a great deal from expansions. Pool Corp plans to foray in newer geographic locations, expand in existing markets and launch product categories that will boost market share. The company completed six acquisitions in the last year.

Also, Pool Corp generates a large portion of revenues from existing pools. The company’s existing pool business witnessed revenue growth throughout 2015, 2016, 2017 and 2018. The upside was mainly aided by higher replacement activities. The trend is expected to have continued in the first quarter of 2019 as well.

How Will Earnings Shape Up?

Pool Corp has been facing increased expenses lately, which are likely to affect earnings in the to-be-reported quarter. Higher labor and delivery costs, as well as investments in information technology systems and hardware, led to higher expenses. In the fourth quarter of 2018, cost of sales increased 4.9% from the prior-year quarter number. Selling and administrative expenses also improved 4.9% year over year. In fact, we believe that Pool Corp has to work hard toward cutting expenses to achieve high margins.

Meanwhile, in 2018, cost of sales increased 7.3% year over year and the trend is likely to have continued in the first quarter. For the first quarter, the company’s earnings are expected to be 63 cents per share, suggesting a 16% decline from the prior-year quarter.

What Does the Zacks Model Unveil?

Our proven model does not predict that Pool Corp is likely to beat earnings estimates this quarter. This is because a stock needs to have both — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Pool Corp has an Earnings ESP of 0.00% and a Zacks Rank #3, which make surprise prediction difficult. You can see the complete list of today’s Zacks #1 Rank stocks here.

Pool Corporation Price and EPS Surprise

 

Pool Corporation Price and EPS Surprise | Pool Corporation Quote

Stocks With Favorable Combinations

Here are a few stocks from the Consumer Discretionary sector that investors may consider as our model shows that these have the right combination of elements to post an earnings beat in the first quarter:

Las Vegas Sands LVS has an Earnings ESP of +4.65% and it currently carries a Zacks Rank #2. The company is scheduled to report quarterly numbers on Apr 24, after the market closes.

Wynn Resorts WYNN has an Earnings ESP of +6.51% and a Zacks Rank #3 at present.

Marriott MAR currently has an Earnings ESP of +0.40% and a Zacks Rank #3.

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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.