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Pool Corp (POOL) Q4 Earnings Beat Estimates, Stock Down

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Pool Corporation (POOL - Free Report) reported solid fourth-quarter 2020 results, with earnings and revenues surpassing the Zacks Consensus Estimate as well as increasing on a year-over-year basis. While the bottom line beat the consensus estimate for the seventh straight quarter, the top line surpassed the same for the sixth consecutive time.

In spite of robust results, shares declined 5.9% on Feb 11 after the company stated that it expects tougher year-over-year comparisons and industry capacity constraints for the second half of 2021. Nonetheless, the company is bullish on long-term owing to increased investments in capacity creation and new sales center openings.

Earnings & Revenue Discussion

Adjusted earnings of $1.45 per share in the quarter topped the Zacks Consensus Estimate of 77 cents and increased 229.5% from the year-ago quarter’s tally. Quarterly net revenues of $839.3 million surpassed the consensus mark of $709 million and increased 44.1% year over year.

Pool Corporation Price, Consensus and EPS Surprise

 

Pool Corporation Price, Consensus and EPS Surprise

Pool Corporation price-consensus-eps-surprise-chart | Pool Corporation Quote

 

Notably, the upside can be primarily attributed to solid performance by the Base business segment and Excluded segment. Markedly, the company witnessed solid demand for residential pool products on the back of stay-at-home trends and favorable weather conditions.

Segmental Performance

Pool Corp reports operations under two segments — The Base Business (constituting majority of the business) and the Excluded (sale centers excluded from the Base business).

During the fourth quarter, revenues in the Base Business segment increased 38.7% year over year to $807.2 million. Operating income rose 196.2% year over year to $77.9 million. Moreover, operating margin expanded 520 basis points (bps) from the year-ago quarter’s number to 9.7%.

The Excluded segment delivered net revenues of $32.1 million, up from $0.4 million registered in the prior-year quarter. During the quarter, the segment reported operating loss of $3.6 million compared with $0.5 million loss reported in the prior-year quarter. The segment’s operating margin came in at (11.1%) compared with (122.3%) reported in the prior-year quarter.

Operating Highlights & Expenses

Cost of sales in the fourth quarter increased 42.8% from the prior-year quarter’s figure. Gross profit, as a percentage of net sales, increased 70 basis points (bps) year over year to 28.5% from 27.8% reported in the year-ago quarter. Selling and administrative expenses rose 20.9% year over year to $164.7 million.

During the fourth quarter, operating income increased 188% year over year to $74.4 million, while operating margin rose 450 bps to 8.9% from the prior-year quarter’s level.

Nonetheless, net income totaled $59.2 million, up from $18 million in the year-ago quarter.

Balance Sheet

As of Dec 31, 2020, Pool Corp’s cash and cash equivalents amounted to $34.1 million compared with $28.6 million as on Dec 31, 2019. As of December end, total net receivables (including pledged receivables) rose 28% year over year. Its net long-term debt amounted to $404.1 million, down 19% from the prior-year quarter’s level. Goodwill increased to $268.2 million from $188.6 million reported in the prior-year quarter.

During the fourth quarter, net cash provided by operating activities came in at $397.6 million compared with $298.8 million in the year-ago quarter.

For the 12 months ended Dec 31, 2020, the company paid out cash dividends worth $91.9 million compared with $83.8 million in the prior-year quarter.

2020 Highlights

Net sales in 2020 came in at $3,936.6 million compared with $3,199.5 million in 2019.

Selling and administrative expenses in 2020 came in at $659.9 million compared with $583.7 million in 2019.

In 2020, adjusted earnings per share (EPS) came in at $8.42 compared with $5.83 in the previous year.

2021 Guidance

For 2021, Pool Corp expects adjusted EPS in the range of $9.01-$9.51. The Zacks Consensus Estimate for 2021 earnings is currently pegged at $9.12.

Zacks Rank & Key Picks

Pool Corp currently sports a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some other better-ranked stocks in the Zacks Consumer Discretionary sector include TEGNA Inc. (TGNA - Free Report) , Brunswick Corporation (BC - Free Report) and Callaway Golf Company (ELY - Free Report) . TEGNA sports a Zacks Rank #1, while Brunswick and Callaway Golf carry a Zacks Rank #2 (Buy).

TEGNA has a three-five-year EPS growth rate of 10%.

Brunswick has a trailing four-quarter earnings surprise of 50.6%, on average.

Callaway Golf 2021 earnings are expected to surge 55.2%.

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