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Pentair (PNR) Up 9.2% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for Pentair (PNR - Free Report) . Shares have added about 9.2% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Pentair due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Pentair Beats Q3 Earnings & Sales Estimates, Ups View
 
Pentair delivered third-quarter 2018 adjusted earnings of 54 cents per share, up around 10% from the year-ago quarter’s tally. Also, the figure beat management’s previous guidance and the Zacks Consensus Estimate of 52 cents. 
 
Including one-time items, the company reported earnings of 52 cents compared with 27 cents in the year-ago quarter.
 
Net sales rose 3% year over year to $711 million. The figure surpassed the Zacks Consensus Estimate of $700 million. Excluding the impact of currency translation and acquisitions, core sales improved 6%.
 
Cost of sales climbed 3.7% to $468 million from $451 million in the year-ago quarter. Gross profit in the reported quarter was $244 million, up 3.1% from $237million in the prior-year quarter.  
 
Selling, general and administrative expenses amounted to $116 million, flat compared with the year-ago quarter. Research and development expenses went up 7% year over year to $19 million. Adjusted segment operating income increased 1% to $122 million from $120 million in the year-ago quarter.
   
Segmental Performance
 
Sales in the Aquatic Systems segment rose 10% year over year to $233 million. Operating earnings increased 13% to $60 million.
 
Revenues in the Filtration Solutions segment totaled $240 million, down 1% from the prior-year quarter’s figure. Operating earnings went down 5% year over year to $38 million.
 
Revenues in the Flow Technologies segment totaled $238 million, up 2% from the year-earlier quarter’s tally. Segmental operating earnings declined 7% year over year to $37 million.
 
Financial Update
 
Pentair had cash and cash equivalents of $64.7 million as of Sep 30, 2018, down from $81.3 million recorded as of Sep 30, 2017. The company recorded cash flow from operations of $299 million during the nine-month period ended Sep 30, 2018, compared with $148 million recorded in the comparable period last year.
 
Guidance
 
Pentair revised 2018 adjusted earnings per share guidance to around $2.33 (up from previous expectation of roughly $2.31) and sales outlook to $2.96 billion (up from $2.95 billion). Revenues are now expected to be up 4% and 5% on a reported and core basis over 2017, respectively.
 
Pentair initiated fourth-quarter 2018 adjusted earnings per share guidance of roughly 59 cents. Sales are expected to be around $736 million, up 1-2% on a reported basis and up 4-5% on a core basis compared with fourth-quarter 2017. The projections reflect the separation of its Electrical business, on Apr 30, 2018.
 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

Currently, Pentair has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. Notably, Pentair has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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