Earnings Preview: Pool Corp.

Pool Corp. ( POOL - Analyst Report ) is slated to report its first quarter 2012 results on April 19, 2012. The current Zacks Consensus Estimate for first quarter earnings is a penny per share, representing an estimated 157.2% annualized growth.

Earnings Surprise

With respect to earnings surprises over the trailing four quarters, Pool has outperformed the Zacks Consensus Estimate in all the quarters. The earnings surprise ranges from 3.48% to 87.50%, with an average of 24.93%. This implies that the company has surpassed the Zacks Consensus Estimate by the same magnitude over the last four quarters.

Fourth Quarter Recap

Pool Corp.’s fourth quarter 2011 loss per share of 21 cents was narrower than the Zacks Consensus Estimate of 22 cents loss per share and the year-ago loss of 24 cents. The outperformance was mainly driven by solid top-line growth. Net sales in the reported quarter jumped 12% year over year to $270.4 million.

Overall Base business sales of Pool improved 10% year over year. Blue business sales increased 10% in the quarter, while Green business sales were up 7.8%.

Gross profit grew 9.8% year over year to $80.8 million and gross margin fell 60 basis points (bps) to 29.9%, attributable to Pool’s pricing discipline coupled with improvements in sales trends.

Guidance

For full-year 2012, management expects earnings per share in the range of $1.69–$1.79. Pool anticipates sales growth in the mid-to-upper single digits, including the impact of acquisitions and the opening of new locations in 2012.

Earnings Estimate Revisions – Overview

Before the earnings release, we see a somewhat positive outlook prevailing around the stock.

Agreement

Over the last 7 days period, 1 out of 7 analysts’ estimate for the first quarter moved north while there was no downward revision. Of 8 analysts, 1 analyst also upped its estimate for full-fiscal 2012.

Magnitude

The magnitude of revisions for the forthcoming quarter increased a penny over the last 7 days period. However, the estimate for full year 2012 remained static at $1.75.

Our Take

We remain positive on the stock based on the company’s strong market position and earnings power. According to management, earnings per share will grow at a rate of 20% per year for the next five years considering a rational macroeconomic recovery. We are also supportive of management’s view and believe that the company is experiencing an uptrend, even in its Green business, which was once struggling. Since the first quarter of fiscal 2011, the business is generating positive results. Management commented that the market will slowly improve beyond 2012.

Pool Corp, which competes with the likes of Johnson Outdoors Inc. ( JOUT - Snapshot Report ) and Golfsmith International Holdings Inc. ( ) , currently holds a Zacks #2 Rank (short-term Buy recommendation).