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Pentair (PNR) to Report Q2 Earnings: Can the Stock Surprise?

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Pentair plc (PNR - Free Report) is set up to report second-quarter 2016 results on Jul 28, before the market opens. In the last-reported quarter, the company’s adjusted earnings remained flat year over year. Earnings, however, outperformed the Zacks Consensus Estimate.

Let’s see how things are shaping up for this quarter.

Factors to Consider

For the second quarter, Pentair expects earnings per share in the $1.08–$1.11 range, up approximately 2% on an adjusted basis. Revenues are projected at around $1.7 billion for the quarter, improving around 4% on a reported basis and down approximately 3% on a core basis.

Pentair will continue to benefit from the optimism related to the Residential & Commercial businesses and stabilization in Industrial businesses.

Pentair is aggressively managing its cost structure and boosting productivity to work through near-term challenges. It is also investing in its high-performing Technical Solutions and Water Quality Systems segments in which it sees strategic organic and inorganic growth opportunities.  

However, orders in the Valve & Control segment are not expected to improve in the near term, owing to the global economic uncertainty and as customers continue to re-evaluate the planned projects. On a core sales basis, valves and controls are expected to fall roughly 13% in the second quarter.

Further, the company’s energy-related businesses will remain challenged due to the slump in oil prices. Given the current state of consolidation, particularly in the beer industry, Pentair believes that sales will remain volatile. This, in turn, is likely to hurt this quarters’ performance. Moreover, unfavorable foreign exchange, weak agricultural market and a stronger dollar will continue to weigh on Pentair’s results.

Earnings Whispers

Our proven model shows that Pentair is likely to beat earnings because it has the right combination of the two key ingredients.

Zacks ESP: Pentair’s Earnings ESP stands at +0.91%. This is because the company’s Most Accurate estimate is $1.11, whereas the Zacks Consensus Estimate is pegged at $1.10. A favorable ESP serves as a meaningful and leading indicator of a likely positive surprise.

Zacks Rank: Pentair currently has a Zacks Rank #3 (Hold). Note that stocks with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 have a significantly higher chance of beating earnings. Conversely, the Sell-rated stocks (Zacks Rank #4 and 5) should never be considered going into an earnings announcement.

The combination of Pentair’s Zacks Rank #3 and +0.91% ESP makes us reasonably confident of an earnings beat.

Surprise History

Pentair outpaced the Zacks Consensus Estimate in each of the trailing four quarters. The average positive surprise was 4.61%. In the last reported quarter, the company posted a positive earnings surprise of 5.56%.

PENTAIR PLC Price and EPS Surprise

PENTAIR PLC Price and EPS Surprise | PENTAIR PLC Quote

Stocks That Warrant a Look

Here are some stocks which you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Allegion Plc (ALLE - Free Report) has an Earnings ESP of +2.25% and a Zacks Rank #2.

Ball Corporation has an Earnings ESP of +1.01% and a Zacks Rank #3.

Colfax Corporation has an Earnings ESP of +2.56% and a Zacks Rank #3.

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