Pool Corporation POOL reported better-than-expected results in fourth-quarter 2017.
Adjusted earnings of 21 cents per share in the quarter surpassed the Zacks Consensus Estimate of 17 cents by 23.5%. The bottom line increased a whopping 250% from the year-ago quarter on the back of improved net income.
Quarterly net sales of $510.2 million beat the consensus estimate of $478.4 million by 6.6% and grew 15% year over year. The revenue growth was primarily attributable to growth in the company’s base business.
Pool Corporation Price, Consensus and EPS Surprise
Notably, Pool Corp’s shares declined 1.3% in after-hours trading following the earnings release. However, the company’s shares have rallied 36.9% in the past year, outperforming the
industry’s gain of 23.5%.
Let’s take a detailed look at the company’s fourth-quarter results.
Pool Corp reports operations under two segments, the Base Business segment (constituting majority portion of the business) and the Excluded segment (sale centers excluded from base business).
The Base Business segment witnessed sales growth of 13.3% year over year. Operating income in the segment increased 87.6%. Operating margin as a result increased 140 basis points (bps) in the quarter.
The Excluded segment saw net sales of nearly $7 million, up from $1 million in the prior-year quarter. The segment witnessed operating loss of $1.6 million, wider than the prior-year quarter’s loss of $0.3 million.
Operating Highlights & Expenses
Cost of sales in the quarter increased 14.9% from the prior-year quarter. Gross profit, as a percentage of net sales, therefore declined 20 bps from the year-ago level.
Operating income increased 77.1% year over year to $17.3 million. Operating margin increased 120 bps in the quarter. Selling and administrative expenses also rose 8.6% year over year. Net income was $25.7 million, up from $2.6 million in the year-ago quarter.
Balance Sheet As of Dec 31, 2017
Cash and cash equivalents were $29.9 million, compared with $22 million in the prior year. Total net receivables, including pledged receivables, increased 18% over the prior year, reflective of fourth-quarter sales growth and two acquisitions completed last December.
Long-term debt was $508.8 million, up 16% from the prior year. Goodwill in 2017 increased 3% year over year. Total Inventory levels grew 10% to $536.5 million from $486.1 million last year.
Cash provided by operations was $175.3 million in 2017, showing an increase of $9.9 million on an increase in net income, partially offset by changes in working capital.
Net sales increased 8% year over year to $2.79 billion. Gross profit reached $805.3 million for the year, reflecting a 9% increase from 2016. Gross margin also expanded 10 bps from the year-ago quarter.
Operating income for the year increased 11% to $284.4 million from the prior year. EPS increased 15% year over year.
2018 EPS Expectation
For 2018, the company expects diluted EPS in the range of $5.36 to $5.61.
Zacks Rank & Stocks to Consider
Pool Corp carries a Zacks Rank #3 (Hold).
A few better-ranked stocks in the
Consumer Discretionary sector include Hilton ( HLT Quick Quote HLT - Free Report) , Marriott MAR and Choice Hotels CHH, each carrying a Zacks Rank #2 (Buy). You can see . the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here
Hilton, Marriott and Choice Hotel’s earnings for 2018 are projected to grow 26%, 18.4% and 20%, respectively.
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