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Pool Corporation (POOL - Analyst Report) is on a roll, having delivered 4 consecutive positive earnings surprises.

And management expects this strong momentum to continue in 2012. After its latest beat, management provided 2012 earnings guidance above consensus, prompting analysts to revise their estimates higher. It is a Zacks #2 Rank (Buy) stock.

In addition to strong growth, the company offers a dividend that yields a solid 1.6%.

Company Description

Pool Corporation is the largest wholesale distributor of swimming pool and related backyard products. It operates 298 sales centers in North America and Europe.

The company is headquartered in Covington, Louisiana and has a market cap of $1.7 billion.

Fourth Quarter Results

The fourth quarter is seasonally slow for Pool, but results still came in ahead of expectations. The company reported a loss per share of 21 cents, ahead of the Zacks Consensus Estimate by a penny. This was also better than the loss of 24 cents in the same quarter last year.

Net sales rose 12% to $270.4 million, beating the Zacks Consensus Estimate of $258.0 million. Base business sales increased 10%.

Operating loss for the quarter was $14.3 million compared to a loss of $16.8 million in the same quarter last year.

Outlook

CEO Manuel Perez de la Mesa described Pool's full year 2011 results as "exceptional". And he expects to leverage that momentum and take market share in 2012.

The company expects to earn between $1.69 to $1.79 per share in 2012 on sales growth in the mid- to upper-single digits. This was ahead of the consensus at the time and prompted analysts to revise their estimates higher, sending the stock to a Zacks #2 Rank (Buy).

The Zacks Consensus Estimate for 2012 is now $1.75, within guidance, and representing 19% growth over 2011 EPS. The 2013 consensus estimate is currently $2.06, corresponding with 18% growth.

The company is scheduled to report its first quarter results on April 18.

Dividend

Pool began paying a dividend in 2004 and has raised it 6 times since then at a compound annual rate of 10%.

It currently yields 1.6%.

Its payout ratio is a very manageable 38%, so as long as earnings continue to grow, expect more dividend hikes in the future.

Valuation

Shares trade at 20x 12-month forward earnings, a small premium to its 10-year median of 18x. But this premium seems justified given its stellar expected growth over the next two years.

The Bottom Line

With strong earnings momentum, solid growth projections, and a 1.6% yield, Pool Corporation has a lot of upside potential.

Todd Bunton is the Growth & Income Stock Strategist for Zacks Investment Research and Co-Editor of the Reitmeister Value Investor.

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