Pool CorporationPOOL reported mixed results in the second quarter of 2018, wherein earnings missed analysts' expectations while revenues beat the same.
Earnings of $2.80 per share in the quarter lagged the Zacks Consensus Estimate of $2.84 by 1.4%. The bottom line however increased 26.7% from the year-ago quarter on the back of improved net income and tax benefits.
Quarterly net sales of $1,057.8 million surpassed the consensus estimate of $1,052 million by 0.6% and also grew 7% year over year. The revenue growth was primarily attributable to improved performance of the company's base business.
Improved revenues and earnings, coupled with upbeat EPS guidance probably went well with investors, as following the earnings release on Jul 19, shares were up 2.6% in the trading session. Also, shares of Pool Corp have gained 51.3% in the past year, outperforming the industry 's rally of 24.4%.
Let's delve deeper into the numbers.
Pool Corp reports operations under two segments: The Base Business segment (constituting majority of the business) and Excluded segment (sale centers excluded from base business).
The Base business segment recorded sales growth of 6.2% to nearly $1 billion year over year. Operating income in the segment increased 11%. Operating margin however fell 20 basis points (bps) from the year-ago quarter.
The Excluded segment reported net sales of $14.1 million, up from nearly $5.7 million in the prior-year quarter. The segment generated operating income of $0.6 million against the prior-year quarter's loss of $2 million.
Operating Highlights & Expenses
Cost of sales in the quarter increased 7.3% from the prior-year quarter. Gross profit, as a percentage of net sales, fell 10 bps from the year-ago level.
Operating income increased 5.1% year over year to $162 million. Operating margin fell 30 bps from the prior-year quarter. Selling and administrative expenses increased 8.2% year over year. Net income was $117 million, up from $94.6 million recorded in the year-ago quarter.
Adjusted EBITDA increased to $172.1 million in the quarter from $163.8 million in the second quarter of 2017.
Pool Corporation Price, Consensus and EPS Surprise
Cash and cash equivalents as of Jun 30, 2018 were $42.2 million compared with $26.7 million on Jun 30, 2017. Total net receivables, including pledged receivables, increased 20% and inventory levels grew 12% in the same time frame compared with Jun 30, 2017. Long-term debt was $635.7 million, up 18% from the prior-year quarter. Goodwill increased 2% year over year.
Cash used in operations increased $4.5 million. The increase in cash usage was due to earlier payment of a few inventory purchases.
Raised 2018 EPS Expectation
For 2018, the company expects EPS in the range of $5.50-$5.70, up from the previous guided range of $5.45-$5.70.
Zacks Rank & Other Stocks to Consider
Pool Corp currently carries a Zacks Rank #2 (Buy).
Other top-ranked stocks in the leisure space include Johnson Outdoors JOUT , Malibu Boats MBUU and Polaris PII , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here .
Johnson Outdoors, Malibu Boats and Polaris' earnings for 2018 are expected to increase 31.5%, 56.4% and 34.9%, respectively.
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