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Pool Corp (POOL) Stock Outruns S&P 500, Surges 59% YTD
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Shares of Pool Corporation (POOL - Free Report) have surged 59% year to date, compared with the S&P 500’s rally of 13.9%. The company has been benefiting from robust base business, expansion initiatives, solid demand for swimming pool maintenance supplies and healthy balance sheet. The company has raised guidance for 2020.
Moreover, an upward revision in earnings estimates for 2021 reflects analysts’ confidence in the Zacks Rank #2 (Buy) company’s potential. Over the past 60 days, the Zacks Consensus Estimate for its 2021 earnings has moved up 10.8% to $9.02. Let’s delve deeper and find out factors driving the stock.
Factors Driving Growth
Pool Corp generates majority of its revenues from the base business, which excludes sales centers that are acquired, closed or opened in new markets for a period of 15 months. In third-quarter 2020, the company’s base business segment contributed 99.5% to total revenues. Pool Corp’s sincere efforts to boost base business are reflected in high demand in end markets. In the third quarter, revenues from base business increased 26.6% year over year to $1,133.6 million.
The company benefits from its market-leading position that offers cost advantage and allows it to generate higher return on investment than smaller companies. Further, the housing market continues to boost demand for Pool Corp’s products despite numerous competitors and low barriers to entry. Moreover, solid demand for swimming pool maintenance supplies, above ground pools, spas, and automatic pool cleaners, heaters, pumps, lights, chemicals and filters drove the company’s third-quarter 2020 results. The company also witnessed healthy demand for construction materials and products. Notably, earnings and revenues in the third quarter improved 47.3% and 26.8% on a year-over-year basis, respectively.
Pool Corp is focused on expansion to drive revenues. It is foraying into newer geographic locations, expanding in existing markets and launching innovative product categories that will bolster its market share. To this end, the company is also trying to expand through various acquisitions. In the first nine months of 2020, the company added two facilities. The company closed two of its acquisitions, namely Master Tile Network and Northeastern Swimming Pool Distributors in February and September, respectively. Meanwhile, in October, the company acquired Jet Line Products, Inc., thereby adding three locations in New Jersey, three in New York, two in Texas and one in Florida.
Moreover, the company has a strong balance sheet, which will help it tide over the coronavirus pandemic. At the end of third-quarter 2020 (ended Sep 30), the company had a debt-to-total capital ratio of 0.4 compared with 0.5 in the second quarter, thereby indicating that its debt level is manageable. Moreover, the company’s leverage ratio, as measured on a trailing 12-month debt to EBITDA basis, improved to 1.01 in third-quarter 2020 from 1.26 at the end of second-quarter 2020. Moreover, the company anticipates cash flow from operations to remain strong in order to support the business amid such trying times.
Smith & Wesson Brands earnings has a trailing four-quarter earnings surprise of 27.5%, on average.
Shares of Vista Outdoor have surged 64.7% in the past six months.
YETI Holdings has an impressive long-term earnings growth rate of 18.3%.
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
Image: Bigstock
Pool Corp (POOL) Stock Outruns S&P 500, Surges 59% YTD
Shares of Pool Corporation (POOL - Free Report) have surged 59% year to date, compared with the S&P 500’s rally of 13.9%. The company has been benefiting from robust base business, expansion initiatives, solid demand for swimming pool maintenance supplies and healthy balance sheet. The company has raised guidance for 2020.
Moreover, an upward revision in earnings estimates for 2021 reflects analysts’ confidence in the Zacks Rank #2 (Buy) company’s potential. Over the past 60 days, the Zacks Consensus Estimate for its 2021 earnings has moved up 10.8% to $9.02. Let’s delve deeper and find out factors driving the stock.
Factors Driving Growth
Pool Corp generates majority of its revenues from the base business, which excludes sales centers that are acquired, closed or opened in new markets for a period of 15 months. In third-quarter 2020, the company’s base business segment contributed 99.5% to total revenues. Pool Corp’s sincere efforts to boost base business are reflected in high demand in end markets. In the third quarter, revenues from base business increased 26.6% year over year to $1,133.6 million.
The company benefits from its market-leading position that offers cost advantage and allows it to generate higher return on investment than smaller companies. Further, the housing market continues to boost demand for Pool Corp’s products despite numerous competitors and low barriers to entry. Moreover, solid demand for swimming pool maintenance supplies, above ground pools, spas, and automatic pool cleaners, heaters, pumps, lights, chemicals and filters drove the company’s third-quarter 2020 results. The company also witnessed healthy demand for construction materials and products. Notably, earnings and revenues in the third quarter improved 47.3% and 26.8% on a year-over-year basis, respectively.
Pool Corp is focused on expansion to drive revenues. It is foraying into newer geographic locations, expanding in existing markets and launching innovative product categories that will bolster its market share. To this end, the company is also trying to expand through various acquisitions. In the first nine months of 2020, the company added two facilities. The company closed two of its acquisitions, namely Master Tile Network and Northeastern Swimming Pool Distributors in February and September, respectively. Meanwhile, in October, the company acquired Jet Line Products, Inc., thereby adding three locations in New Jersey, three in New York, two in Texas and one in Florida.
Moreover, the company has a strong balance sheet, which will help it tide over the coronavirus pandemic. At the end of third-quarter 2020 (ended Sep 30), the company had a debt-to-total capital ratio of 0.4 compared with 0.5 in the second quarter, thereby indicating that its debt level is manageable. Moreover, the company’s leverage ratio, as measured on a trailing 12-month debt to EBITDA basis, improved to 1.01 in third-quarter 2020 from 1.26 at the end of second-quarter 2020. Moreover, the company anticipates cash flow from operations to remain strong in order to support the business amid such trying times.
Other Stock to Consider
Some other top-ranked stocks, which warrant a look in the same space include Smith & Wesson Brands, Inc. (SWBI - Free Report) , Vista Outdoor Inc. (VSTO - Free Report) and YETI Holdings, Inc. (YETI - Free Report) . All these stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Smith & Wesson Brands earnings has a trailing four-quarter earnings surprise of 27.5%, on average.
Shares of Vista Outdoor have surged 64.7% in the past six months.
YETI Holdings has an impressive long-term earnings growth rate of 18.3%.
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>