If you are still holding on to shares of Pentair plc (PNR Quick QuotePNR - Free Report) in your portfolio, it is time you dump those as chances of favorable returns in the near term appear bleak. Pentair has witnessed a significant price decline in the year-to-date period owing to material and other cost inflation  as well as headwinds pertaining to the separation of the Electrical business.

 

Similar to wise buying decisions, offloading certain underperformers at the right time helps maximize portfolio returns. Further, negative earnings estimate revisions for the current quarter and the fiscal indicate bleaks prospects for the company in near term. Further, the company’s Zacks Rank #5 (Strong Sell) only reflects its innate weakness.

 

 

Shares of this diversified industrial manufacturing company have plunged approximately 38% year to date, faring worse than the industry’s decline of 12%.

 

Let’s take a look at factors behind this dismal performance.

 

 

The company has identified attractive opportunities in specific product and geographic markets, both within and outside the United States. The company is reinforcing its businesses to effectively address these opportunities through research & development as well as additional sales and marketing resources. Unless it is successful in its endeavors, the company’s sales growth is likely to be limited in the near term or may even decline.

 

Further, Pentair continues to witness inflation in material and other costs. The current economic environment is likely to fuel the persisting price volatility for raw materials.

 

 

Pentair's separation of the Electrical business will create two industry leading pure play companies in Water and Electrical — Pentair plc and nVent Electric plc ("nVent"), respectively. Although the separation will provide financial, operational, managerial and other benefits to the company as well as its shareholders, risks persist in connection with the separation. Moreover, Pentair will also incur certain costs and expenses relating to the spin-off. Those costs may exceed its estimates or could negate some of the expected benefits.

 

If the intended benefits are not realized or costs exceed estimates, it would have an adverse effect on the financial condition. Further, each management team's inability to control additional stranded corporate costs or to deliver a smooth transition might affect near-term business performance.

 

 

Sales outside the United States accounted for 40% of net sales in fiscal 2017. Fluctuations in foreign currency exchange rates, most notably the strengthening of the U.S. dollar against the euro, could have an adverse material effect on the company’s revenues. Additionally, currency variations could have a negative material effect on margins on sales of products in countries outside the United States and margins on sales of products that include components obtained from suppliers located outside the country.

 

Looking at the prevailing challenges and an unfavorable Zacks rank, it is wise to stay away from investing in Pentair stock right now.

 

Some better-ranked stocks in the sector include Axon Enterprise, Inc. , DMC Global Inc. (BOOM Quick QuoteBOOM - Free Report) and W.W. Grainger, Inc. (GWW Quick QuoteGWW - Free Report) . All of these stocks carry sport Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

 

Axon Enterprise has expected long-term growth rate of 25%. Its shares have surged 167% in a year’s time.

 

DMC Global has expected long-term growth rate of 20%. Its shares have appreciated 219% over the past year.

 

Grainger has expected long-term growth rate of 12%. Its shares have appreciated 78% over the past year.

 

 

Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.