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Pentair (PNR) Rides on Strong Demand in the Pool Business
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Pentair plc (PNR - Free Report) is poised well to gain from solid demand for swimming pools. Focus on investing in innovation, technology and acquisitions in the pool business as well as residential and commercial water treatment will continue to stoke growth.
Strong Pool Demand to Aid Growth
Pentair’s pool business has generated a 10-year revenue CAGR of approximately 10%. The business benefitted from the surge in demand for swimming pools amid the pandemic as consumers were forced to stay at home, which triggered the desire to invest in their backyards. Even though the impact of the pandemic has abated, consumers continue to enhance their at-home quality of life by investing in pools. The emergence of Airbnb and Vrbo has also contributed to the rise in demand for homes with pools.
PNR estimates that the pool industry in North America caters to a large installed base of approximately 5.4 million pools, with the average age of these pools approaching 25 years. Around 60% of the industrial demand is for repairing, 20% for major remodeling and 20% for new pools. Pentair is poised well to gain from these demand trends in the long term. Also, given that half of the installed pools lack any form of automation, the growing preference for more autonomous and energy-efficient pools will benefit the company as well.
Transformation Program to Boost Margins
During second-quarter 2021, Pentair launched a Transformation program to accelerate growth and drive margin expansion. The program, structured in multiple phases, is expected to drive operational efficiency, streamline processes, and reduce complexity while meeting financial objectives. It will also utilize automation to increase productivity. The company is projecting at least 300 basis points of margin expansion by 2025 through the program.
Innovation, Acquisitions Remain Key Catalysts
Pentair is investing in digital transformation, innovation and technology. Its strategy to grow through acquisitions in the high-growth areas of pool, residential and commercial water treatment, is commendable. In the Water Treatment business, Pentair is investing in innovative components, such as flat-connected valves for water softeners. Within Water Treatment, the company believes that there are opportunities to rapidly expand its $50 million end-to-end residential services business.
In July 2022, Pentair completed the acquisition of Manitowoc Ice, which enables the company to enhance and deliver total water management offerings to an expanded network of channel partners and customers. The buyout will expand the company’s commercial water solutions platform and drive growth in the food service industry.
Price Performance
Image Source: Zacks Investment Research
Pentair’s shares have gained 6.3% in the past three months compared with the industry’s decline of 3%.
Some other top-ranked stocks in the Industrial Products sector are KnowBe4 , Deere & Company (DE - Free Report) and Caterpillar Inc. (CAT - Free Report) . While KNBE sports a Zacks Rank of 1, DE and CAT carry a Zacks Rank of 2.
KnowBe4’s earnings surprise in the last four quarters was 216.7%, on average. The Zacks Consensus Estimate for the company’s 2022 earnings is pegged at 24 cents per share, indicating a 118% increase year over year. The estimates have gone up 4% in the past 30 days. KNBE’s shares have appreciated 11% in the past three months.
The Zacks Consensus Estimate for Deere earnings per share in fiscal 2023 is pegged at $27.83, suggesting a 19.5% increase from last year. The consensus estimate has moved 2% upward in the past 30 days. DE has a trailing four-quarter average earnings surprise of 7%. DE’s shares have gained 19% in the past three months.
Caterpillar has an estimated year-over-year earnings growth rate of 28% for fiscal 2022. The earnings per share estimate is currently pegged at $13.85. Estimates have been revised by 1% north in the past 30 days. CAT has an average trailing four-quarter earnings surprise of 14.7%. Its shares have gained 34% over the past three months.
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Pentair (PNR) Rides on Strong Demand in the Pool Business
Pentair plc (PNR - Free Report) is poised well to gain from solid demand for swimming pools. Focus on investing in innovation, technology and acquisitions in the pool business as well as residential and commercial water treatment will continue to stoke growth.
Strong Pool Demand to Aid Growth
Pentair’s pool business has generated a 10-year revenue CAGR of approximately 10%. The business benefitted from the surge in demand for swimming pools amid the pandemic as consumers were forced to stay at home, which triggered the desire to invest in their backyards. Even though the impact of the pandemic has abated, consumers continue to enhance their at-home quality of life by investing in pools. The emergence of Airbnb and Vrbo has also contributed to the rise in demand for homes with pools.
PNR estimates that the pool industry in North America caters to a large installed base of approximately 5.4 million pools, with the average age of these pools approaching 25 years. Around 60% of the industrial demand is for repairing, 20% for major remodeling and 20% for new pools. Pentair is poised well to gain from these demand trends in the long term. Also, given that half of the installed pools lack any form of automation, the growing preference for more autonomous and energy-efficient pools will benefit the company as well.
Transformation Program to Boost Margins
During second-quarter 2021, Pentair launched a Transformation program to accelerate growth and drive margin expansion. The program, structured in multiple phases, is expected to drive operational efficiency, streamline processes, and reduce complexity while meeting financial objectives. It will also utilize automation to increase productivity. The company is projecting at least 300 basis points of margin expansion by 2025 through the program.
Innovation, Acquisitions Remain Key Catalysts
Pentair is investing in digital transformation, innovation and technology. Its strategy to grow through acquisitions in the high-growth areas of pool, residential and commercial water treatment, is commendable. In the Water Treatment business, Pentair is investing in innovative components, such as flat-connected valves for water softeners. Within Water Treatment, the company believes that there are opportunities to rapidly expand its $50 million end-to-end residential services business.
In July 2022, Pentair completed the acquisition of Manitowoc Ice, which enables the company to enhance and deliver total water management offerings to an expanded network of channel partners and customers. The buyout will expand the company’s commercial water solutions platform and drive growth in the food service industry.
Price Performance
Image Source: Zacks Investment Research
Pentair’s shares have gained 6.3% in the past three months compared with the industry’s decline of 3%.
Zacks Rank & Stocks to Consider
Pentair currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Some other top-ranked stocks in the Industrial Products sector are KnowBe4 , Deere & Company (DE - Free Report) and Caterpillar Inc. (CAT - Free Report) . While KNBE sports a Zacks Rank of 1, DE and CAT carry a Zacks Rank of 2.
KnowBe4’s earnings surprise in the last four quarters was 216.7%, on average. The Zacks Consensus Estimate for the company’s 2022 earnings is pegged at 24 cents per share, indicating a 118% increase year over year. The estimates have gone up 4% in the past 30 days. KNBE’s shares have appreciated 11% in the past three months.
The Zacks Consensus Estimate for Deere earnings per share in fiscal 2023 is pegged at $27.83, suggesting a 19.5% increase from last year. The consensus estimate has moved 2% upward in the past 30 days. DE has a trailing four-quarter average earnings surprise of 7%. DE’s shares have gained 19% in the past three months.
Caterpillar has an estimated year-over-year earnings growth rate of 28% for fiscal 2022. The earnings per share estimate is currently pegged at $13.85. Estimates have been revised by 1% north in the past 30 days. CAT has an average trailing four-quarter earnings surprise of 14.7%. Its shares have gained 34% over the past three months.