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Pentair (PNR) Beats on Q3 Earnings & Sales, Ups '20 View

Pentair plc PNR reported third-quarter 2020 adjusted earnings per share (EPS) of 70 cents, beating the Zacks Consensus Estimate of 52 cents. The bottom line also improved 21% from 58 cents reported in the prior-year quarter. The improvement can be attributed to ongoing strong demand in the residential focused businesses.

Including one-time items, earnings were 66 cents compared with the prior-year quarter’s 54 cents.

Net sales increased 12% year over year to $798.5 million. Further, the top line surpassed the Zacks Consensus Estimate of $682 million. Excluding the impact of acquisitions, divestitures and currency translation, core sales rose 10% in the reported quarter.

Cost of sales rose 13.6% year over year to $521 million. Gross profit in the reported quarter amounted to $277 million, up 9% from the prior-year quarter. Gross margin came in at 34.7% compared with the year-ago quarter’s 35.7%.

Pentair plc Price, Consensus and EPS Surprise

Pentair plc Price, Consensus and EPS Surprise

Pentair plc price-consensus-eps-surprise-chart | Pentair plc Quote

Selling, general and administrative expenses totaled $130 million compared with $126 million in the prior-year quarter. Research and development expenses declined 2.5% year over year to $19 million. Adjusted segmental operating income improved 14% year over year to $141 million.

Segmental Performance

Net sales in the Consumer Solutions segment jumped 25% year over year to $471 million led by strength in residential markets, particularly the Pool business. Operating earnings surged 39% year over year to $114 million.

Net sales in the Industrial and Flow Technologies segment totaled $327 million, down 2.6% from the prior-year quarter. Operating earnings slumped 24% year over year to $42.7 million. The segment continues to be negatively impacted by delayed capital spending globally across its commercial and industrial markets.

Financial Update

Pentair had cash and cash equivalents of $82.6 million as of Sep 30, 2020 flat compared with Dec 31, 2019. Net cash from operating activities was around $501 million during the nine-month period ended Sep 30, 2020 compared with the $266 million in the prior-year period. The company generated free cash flow of $456 million in the nine-month period ended Sep 30, 2020 compared with $221 million witnessed in the year-earlier period. The company had long-term debt of $805.2 million as of Sep 30, 2020, down from $1.03 billion as of Dec 31, 2019.

Guidance

For the current year, Pentair now expects adjusted EPS between $2.35 and $2.40, up from the previous guidance of $2.00-$2.20. The company anticipates revenues of $2.95 billion, higher than the earlier expectation of $2.8 billion.

Price Performance

Pentair’s stock has gained 26.3% over the past year compared with the industry’s growth of 27.4%.

Zacks Rank & Other Stocks to Consider

Pentair currently carries a Zacks Rank #2 (Buy).

Some other top-ranked stocks in the Industrial Products sector include Worthington Industries, Inc. WOR, Silgan Holdings Inc. SLGN and Fortune Brands Home & Security, Inc. FBHS. While Worthington Industries sports a Zacks Rank #1 (Strong Buy), Silgan and Fortune Brands Home & Security carry a Zacks Rank #2, currently. You can see the complete list of today’s Zacks #1 Rank stocks here.

Worthington has an estimated earnings growth rate of 19.2% for 2020. The company’s shares have gained 40% in a year’s time.

Silgan has a projected earnings growth rate of 32% for the current year. Shares of the company have gained 24% in the past year.

Fortune Brands has an expected earnings growth rate of 6.9% for the ongoing year. The stock has appreciated 49% in the past year.

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