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Pool Corp Up 15.6% in 3 Months: What's Driving the Stock?

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Pool Corporation (POOL - Free Report) is poised to benefit from its expansion strategies, robust base business as well as remodel and replacement activities. Also, solid demand across swimming pool maintenance supplies is adding to the upside.

In the past three months, shares of Pool Corp have gained 15.6% compared with the industry’s 27.4% growth. Moreover, an upward revision in earnings estimates for 2020 reflects analysts’ optimism regarding the company’s growth potential. Over the past 60 days, the Zacks Consensus Estimate for 2020 earnings has moved up 22.3% to $7.25 per share.

Factors Driving Growth

Pool Corp banks heavily on expansion initiatives to drive revenues. Notably, the company is foraying into newer geographic locations in order to expand in existing markets and launch innovative product categories to boost its market share. It is also trying to expand through various acquisitions. So far this year, it has added five facilities. We believe that Pool Corp will continue to capture market share from regional pool and irrigation distributors, given its economies of scale, which drives higher rebates, better sourcing, IT resources, and product availability.

The company is also benefitting from the solid performance of its base business segment. During second-quarter 2020, the company’s base business segment contributed 99.7% to total revenues. Also, revenues from base business increased 11.5% year over year to $1,276.6 million compared with $1,117.9 million in the prior-year quarter.

Apart from this, the company’s remodeling and replacement activities have been a key growth driver over the past few years. During the second quarter of 2020, building materials sales grew 7% on the back of strong demand in construction and remodel markets. Equipment and chemical sales increased 20% and 8% year over year, respectively, for the same quarter. The increase was primarily driven by solid demand for maintenance, repair and replacement products. Notably, the company is optimistic about its future performance as well.

Meanwhile, the company’s strong balance sheet should help it tide over the ongoing crisis. At the end of second-quarter 2020 (ended Jun 30), the company had debt-to-total capital ratio of 0.5, compared with 0.6 as on Mar 31, 2020. Moreover, the company’s leverage ratio, as measured on a trailing 12-month debt to EBITDA basis, improved to 1.26 in second-quarter 2020 from 1.49 at the end of first-quarter 2020. Notably, the company expects cash flow from operations to remain strong in order to support the business amid such trying times.

Pool Corp, which shares space with YETI Holdings, Inc. (YETI - Free Report) , Peloton Interactive, Inc. (PTON - Free Report) and Brunswick Corporation (BC - Free Report) in the Zacks Leisure and Recreation Products industry, carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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