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Pentair (PNR) Hits 52-Week High: What's Driving this Upside?

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Shares of Pentair plc (PNR - Free Report) scaled a fresh 52-week high of $63.41 during the trading session on Apr 12, before retracting a bit to close at $63.35. Solid demand in the residential facing business due to the pandemic-induced shelter-in-place restrictions is contributing to this rally. Also, forecast-topping fourth-quarter 2020 results and continued focus on expanding in the areas of pool and residential and commercial water treatment have been driving the stock-price appreciation.

The company’s shares have surged 96.7% over the past year compared with the industry ’s rally of 120.3%.

Earnings & Sales Top Estimates in Q4: Pentair reported fourth-quarter 2020 adjusted earnings per share of 70 cents, beating the Zacks Consensus Estimate of 63 cents. The bottom line improved 3% from the 68 cents reported in the prior-year quarter. Net sales of $796 million also surpassed the consensus mark of $751 million and improved 5% year over year.

The company has a trailing four-quarter average earnings surprise of 21.7%.

Driving Factors

Given the anticipated benefits from Pentair’s residential focused businesses, management projects adjusted earnings per share between $2.60 and $2.75 in 2021. The mid-point of the guided range suggests 7% growth from the adjusted earnings of $2.50 in 2020. For first-quarter 2021, the company estimates adjusted earnings per share to lie between 55 cents and 63 cents. The mid-point of the range calls for a year-over-year jump of 13%.

The company’s pool business is gaining from increased demand for swimming pools amid the shelter-in-place restrictions triggered by the pandemic. Considering that nearly 80% of the Consumer Solutions segment serves residential markets, the ongoing momentum bodes well for the segment. Apart from this, Pentair has been implementing actions to reduce cost structure in response to the pandemic-induced uncertainty. Additionally, Pentair’s productivity-improvement efforts will drive margins.

Management is focused on expansions, particularly in the areas of pool and residential and commercial water treatment through acquisitions. In December 2020, the company acquired Be the Change Labs, Inc. (Rocean) in a bid to expand its core water treatment solutions in the residential and commercial water business.

Pentair has also taken measures to enhance liquidity. Its total debt to total capital ratio stands at 0.28 at the end of 2020, lower than the industry’s 0.34 at the end of 2019. Further, Pentair's times interest earned ratio has improved in the last few quarters and is currently pegged at 19.1X. This further underscore the company’s potential to meet debt obligations.

Positive Growth Projections

The Zacks Consensus Estimate for the company’s current-year earnings is currently pegged at $2.74, suggesting year-over-year growth of 9.6%.

Zacks Rank & Stocks to Consider

Pentair currently carries a Zacks Rank #3 (Hold).

A few better-ranked stocks in the Industrial Products sector are Deere & Co. (DE - Free Report) , AGCO Corp. (AGCO - Free Report) and Applied Industrial Technologies, Inc. (AIT - Free Report) , each carrying a Zacks Rank of 2 (Buy), at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Deere has a projected earnings growth rate of 82.5% for fiscal 2021. Over the past year, the company’s shares have soared 133.2%.

AGCO has an estimated earnings growth rate of 29.9% for the ongoing year. The company’s shares have surged 134.1% in the past year.

Applied Industrial has an expected earnings growth rate of 0.8% for fiscal 2021. The stock has appreciated 78.5% in a year’s time.

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