Back to top

Analyst Blog

Mark Vickery

Mixed 3Q at Pool; Guides Higher

POOL

 ZacksTrade Now

This page is temporarily not available.  Please check later as it should be available shortly. If you have any questions, please email customer support at support@zacks.com or call 800-767-3771 ext.  9339.

Pool Corp.’s (POOL - Analyst Report) third quarter 2012 adjusted earnings per share of 59 cents were ahead of the Zacks Consensus Estimate of 56 cents and 18% above the year-ago level.  One less selling day than the third quarter of 2011 led to a tough comparison in the quarter under review.

The year-over-year increase in earnings was mainly driven by modest top-line growth as well as reduced cost structure. Net sales in the reported quarter increased 5.0% year over year to $528.0 million but lagged the Zacks Consensus Estimate of $531.0 million.  

Inside the Headline Numbers

Overall Base business sales of Pool improved 3% year over year. Sales from swimming pool side business increased only 3% in the quarter, while sales from irrigation business were up 8%. Results were benefited by market share gains, offset somewhat by 1% decline by adverse currency translation.

Among the three largest markets of swimming pool side business, Florida performed relatively better while California and Texas were a little lower than the company average. In those markets, year-over-year comparison made a crucial difference to sales growth.

Gross profit grew 2% year over year to $151.5 million but gross margin fell 70 basis points (bps) to 28.7% due to cut-throat competition, tough year-over-year comparison owing to vendor price increases last year and an adverse customer mix. Operating margin fell 30 bps to 7.8%.

Liquidity

Cash and cash equivalents increased 40% year over year to $28.8 million. Net receivables climbed 9% from the prior-year period to $175.5 million.

The inventory level escalated 3% year over year to $349.3 million at the end of the third quarter. Total long-term debt was $214.3 million versus $268.7 million in the year-ago quarter.

Guidance

After slashing the full-year earnings per share guidance in the last quarter, management raised it this time to the range of $1.80–$1.83 from $1.75–$1.82.

Our Take

Management still expects earnings per share to grow over 20% this year, which if achieved, will mark the third consecutive year of earnings growth. However, tough seasonality in the fourth quarter and faltering consumer confidence mainly in Europe, representing 6% of Pool’s total sales are some causes of concern.

However, on a positive note, there are some commendable attributes in the stock like efficient cost containment efforts, a steady turnaround of the Green business, which was once struggling, and market share gains. The increase in full-year guidance also portrays the company’s inherent strength.

Pool, which competes with the likes of Johnson Outdoors Inc. , holds a Zacks #1 Rank (short-term Strong Buy recommendation). We reiterate our long-term Neutral recommendation on the stock.

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

Learn more

Start for as little as $4.50 per trade.

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
DIXIE GRP IN DXYN 15.84 +7.90%
BOFI HLDG IN BOFI 85.30 +4.97%
RAMBUS INC RMBS 12.31 +4.41%
VIPSHOP HOLD VIPS 148.73 +4.35%
NETFLIX INC NFLX 345.74 +4.32%