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Analyst Blog

Covington, La.-based wholesale distributor of swimming pool accessories, Pool Corp. (POOL - Analyst Report) recently slashed its earnings guidance for 2013 due to inclement weather in North America and Europe. The reduced earnings guidance reflects 10%—15% year-over-year growth, down from the prior expectation of 15%—20% growth.

Earnings guidance for 2013 has been trimmed from the range of $2.13—$2.23 per share to the range of $2.03—$2.13. Management noted that unexpected cooler and wetter weather conditions in the aforementioned markets delayed the start of the pool season and related consumer purchases. The impact of the guidance cut will be more pronounced in the second quarter compared to the third and fourth quarters.

We believe, the revised guidance is a reflection of  Pool’s extreme vulnerability to changes in weather. While abnormally hot and dry conditions are generally favorable for the company's operations, abnormally cool or rainy weather patterns can adversely affect sales.

However, as per management, overall fundamentals of the industry remain strong. However, apart from some markets in North America, Pool’s key year-round markets – California, Texas, Florida and Arizona -- are currently performing well.
 
Pool currently carries a Zacks Rank #4 (Sell). However, given Pool’s solid momentum in the irrigation side of the business and its potential for market share gains in the long run, we do not consider this guidance cut as a major threat.

Some companies from the leisure and recreational products sector that are worth a look include Sturm, Ruger & Co. Inc. (RGR - Snapshot Report) carrying a Zacks Rank #1 (Strong Buy) and Polaris Industries Inc. (PII - Snapshot Report) and Black Diamond Inc. (BDE - Snapshot Report) retaining a Zacks Rank #2 (Buy).
 

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