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Pool Corp.’s (POOL - Analyst Report) first quarter 2012 adjusted earnings per share of 6 cents bettered the Zacks Consensus Estimate of a penny per share as well as year-ago quarter’s loss of a penny per share. The outperformance was mainly driven by solid top-line growth. Net sales in the reported quarter jumped 15.7% year over year to $361.9 million. Favorable weather helped drive both revenue and earnings despite the seasonal weakness of the first quarter.

Inside the Headline Numbers

Overall Base business sales of Pool improved 13% year over year. Blue business sales increased 13.6% in the quarter, while Green business sales were up 2.2%. Record warm temperatures across the Northeast and Midwest assisted sales in the first quarter.

Gross profit grew 14% year over year to $104.6 million and gross margin fell 30 basis points (bps) to 28.9%, attributable to tough year-over-year comparisons.

Financials

Cash and cash equivalents increased substantially year over year to $20.7 million. Net receivables grew 16% from the prior-year period to $201.8 million.

The inventory level upped 5% year over year to $462.8 million at the end of the first quarter. Total long-term debt was $299.0 million versus $180.2 million in the year-ago quarter.

Pool bought back 24,274 shares at an average price of $35.98 in the quarter.

Guidance

For full-year 2012, management increased its earnings per share guidance to the range of $1.75–$1.85 from $1.69–$1.79.

Our Take

The company reported better-than-expected results. Management realizes the opportunity to grow earnings per share over 20% per year over the next five years. The year 2012 is also shaping up well as evident from its increased guidance. Management commented that the market will gradually improve beyond 2012. We are also supportive of management’s view and believe that the company is experiencing an uptrend, even the improvement in its Green business, which was once struggling. Additionally, the company’s upcoming second quarter is also seasonally strong.

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

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