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Pool Corp.’s (POOL - Analyst Report) fourth-quarter 2012 loss of 17 cents per share was narrower than the Zacks Consensus Estimate of a loss of 19 cents per share as well as the year-ago level of a loss of 21 cents per share. The improvement in the bottom line was mainly driven by double-digit top-line growth.

Net sales in the reported quarter increased 13.5% year over year to $306.8 million, ahead of the Zacks Consensus Estimate of $286.0 million buoyed by solid sales from the Base business, which improved 12% year over year.
Gross profit grew 10% year over year to $88.9 million but gross margin fell 90 basis points (bps) to 29.0% due to competitive pricing pressure and an adverse customer as well as product mix.

Full-Year Update

In 2012, adjusted earnings per share (EPS) were $1.85, up 23.0% year over year, and surpassed the Zacks Consensus estimate of $1.82 per share.

Net sales increased 9.0% year over year to $1.95 billion, ahead of the Zacks Consensus Estimate of $1.92 billion driven by strong Base business sales. Base business sales grew 7%, including 7% growth on the swimming pool side of the business and 10% growth on the irrigation side.

Results were benefited by market share gains and improvement in consumer discretionary spending, offset somewhat by 1% decline due to adverse currency translation. Among the three largest markets of swimming pool side business, Florida and Arizona performed well, both up 10.7%.   


For 2013, management expects earnings per share growth in the range of $2.13−$2.23 per share, representing a 15%−20% expansion from adjusted 2012 EPS. Sales growth for 2013 is expected to be in the mid-single digit.

Our Take

We appreciate Pool’s ability to grow earnings per share more than 20% over three consecutive years in a row. There are some commendable attributes of the company like efficient cost containment efforts, a steady turnaround of the irrigation side of business, which was once struggling, and market share gains. However, management expects earnings growth to slow down in the ensuing years due to full capacity utilization. The company has also been reeling under pressure on the margin front.

Pool currently holds a Zacks Rank #3 (Hold). Some companies from leisure and recreational products that are worth a look include Smith & Wesson Holding Corp. (SWHC - Snapshot Report) and Sturm, Ruger & Co. Inc. (RGR - Snapshot Report) carrying Zacks Rank #1 (Strong Buy) and Brunswick Corp. (BC - Snapshot Report) carrying Zacks Rank #2 (Buy).


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PLANAR SYST… PLNR 4.44 +5.21%
BITAUTO HOL… BITA 81.71 +5.12%
CTPARTNERS… CTP 16.66 +4.26%
CHINA BIOLO… CBPO 47.91 +3.30%
MALLINCKROD… MNK 72.94 +2.85%