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Pentair (PNR) Q4 Earnings Meet Estimates, Provides '18 View

Pentair plcPNR reported fourth-quarter 2017 adjusted earnings of 93 cents per share, up 19% from the year-ago quarter. Earnings came in line with the Zacks Consensus Estimate as well as management's guidance.

Including one-time items, the company reported earnings of $1.11 per share, soared 85% from 60 cents recorded in the year-ago quarter.

Net sales went up 6.1% year over year to $1.26 billion. The figure came ahead of the Zacks Consensus Estimate of $1.24 billion. Excluding the impact of currency translation and acquisitions, core sales improved 3%.

Pentair PLC. Price, Consensus and EPS Surprise

Pentair PLC. price-consensus-eps-surprise-chart | Pentair PLC. Quote

Cost of sales climbed 6% to $793 million in the quarter from $748 million recorded in the year-ago quarter. Gross profit in the reported quarter was $468 million, up 6% from $440 million recorded in the prior-year quarter. Gross margin expanded 10 basis points (bps) year over year to 37.1% in the quarter.

Selling, general and administrative expenses flared up 20% year over year to $302 million. Research and development expenses increased 6% year over year at $28.7 million. Adjusted segment operating income increased 11% to $227 million from $204 million recorded in the year-ago quarter. Operating margin advanced 80 bps to 18.0%.

Segmental Performance

Sales from the Water Quality Systems segment rose 5.6% year over year to $721 million. Operating earnings increased 15% to $139 million.

The Electrical segment reported revenues of $542 million, up 6.7% from the year-earlier quarter. Segment operating earnings were up 6% year over year to $109 million.

Financial Update

Pentair had cash and cash equivalents of $113 million at the end of fiscal 2017 end compared with $238.5 million recorded at the end of 2016. The company recorded cash from operations of $674 million in fiscal 2017, compared with $702 million recorded in the last year. It reported free cash flow of $551 million for fiscal 2017, compared with $770 million in the prior year.

Pentair previously announced that its board of directors had unanimously approved a plan to separate into it two publicly-traded companies. The separation is expected to occur through a tax-free spin-off of Electrical segment by Pentair to its shareholders with a target date of Apr 30, 2018.

On Dec 5, 2017, Pentair announced that its Board of Directors approved a 1% hike in the company's annual cash dividend for 2018 to $1.40. 2018 will mark the 42nd consecutive year that Pentair has increased dividend.

Fiscal 2017 Performance

Pentair reported adjusted earnings per share of $3.53 in fiscal 2017, up 19% year over year. Earnings were on par with the Zacks Consensus Estimate as well as management guidance. Including one-time items, earnings was $2.61 compared with $2.47 in the prior fiscal.

Revenues edged up 1% year over year to $4.94 billion in fiscal 2017, which beat the Zacks Consensus Estimate of $4.91 billion. The company had guided revenues of $4.9 billion.

Guidance

Pentair initiated full-year 2018 adjusted EPS guidance of $4.00, reflecting a 13% year-over-year growth over fiscal 2017 earnings. Revenue guidance is at $5.1 billion, which reflects an increase of 3-5% on a reported basis and a rise of 2-4% on a core basis. Compared with revenues of $4.94 billion reported in fiscal 2017, the guidance projects a year-over-year rise of 9%.

It also guided first-quarter 2018 adjusted EPS range of 81-83 cents. Revenues are projected at around $1.26 billion, up approximately 6% on a reported basis and 3% on a core basis compared with first-quarter 2017.

Share Price Performance

Pentair has underperformed the industry with respect to price performance over the past year. The stock has gained 26%, while the industry recorded growth of 33%.

Zacks Rank & Key Picks

Pentair currently carries a Zacks Rank #3 (Hold).

Better-ranked stocks in the same space include Caterpillar Inc. CAT , H&E Equipment Services, Inc. HEES and Komatsu Ltd. KMTUY . All three stocks flaunt a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here .

Caterpillar has an expected long-term earnings growth rate of 10.3%. Its shares have appreciated 70% in a year's time.

H&E Equipment Services has an expected long-term earnings growth rate of 18.6%. The company's shares have gained 56% over the past year.

Komatsu has an expected long-term earnings growth rate of 16.2%. Its shares have surged 60% over the past year.

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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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