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Pool Corp (POOL) Surges 30% in a Year: More Room to Run?

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Is Pool Corporation (POOL - Free Report) part of your portfolio? If not, this is the right time to add the stock. The underlying factors of the company are capable of maintaining the momentum. With a Zacks Rank #2 (Buy), the company has a long-term earnings growth rate of 23.5%, which highlights its inherent strength. Also, the stock price has surged roughly 29.8% in a year’s time against the industry’s decline of 5.6%.

The Zacks Consensus Estimate has trended upward over the past 60 days as analysts raised estimates. Analysts polled by Zacks are convinced about the stock’s upbeat performance. Over the said time frame, the Zacks Consensus Estimate of $5.63 and $6.12 for 2018 and 2019 has risen 9 cents and 8 cents, respectively.

Factors Driving Growth

Pool is focused on strategic expansion. It plans to foray into newer geographic locations, expand in existing markets and launch product categories that will boost market share. Toward this end, Pool is trying to expand through various acquisitions. The company completed six acquisitions last year.

We believe Pool will continue to capture market share from regional pool and irrigation distributors, given its economies of scale, which drives higher rebates, better sourcing, IT resources, and product availability. Additionally, there are opportunities to acquire share from other distributors that are not pool-focused. Consequently, Pool’s outdoor living products and services exhibited strong performance despite disruptions from natural disasters.


Furthermore, Pool generates a large portion of its earnings from the existing pools. While more than half of its gross profit comes from products related to the maintenance and repair of pools, the remainder is derived from the construction and installation of new pools and landscaping. In fact, over the past five years, the pool industry has been showing signs of recovery, mostly supported by the gradual improvement in remodeling and replacement activity.

Pool is committed toward returning more value to shareholders. Apart from share buybacks, there is a dividend distribution program in place. Since 2004, the company has raised its dividend repeatedly. Recently, the company’s share repurchase program was expanded by $150 million. In 2016, 2015, 2014 and 2013, the company returned almost $228 million, $136 million, $169 million and $128 million, respectively, through stock repurchases and dividends. In 2017, the company bought back 1.3 million shares at an average price of $108. In addition to share repurchases, management increased return of excess cash to shareholders through dividends. Recently, the company lifted its quarterly dividend by 22% to 45 cents.

Other Favorably Ranked Stocks

Apart from Pool, there are other stocks that have a favorable Zacks Rank. These include Callaway Golf Company (ELY - Free Report) , Clarus Corporation (CLAR - Free Report) and Malibu Boats, Inc. (MBUU - Free Report) all of which hold a Zacks Rank #2 and have surged 31.9%, 45.7% and 49.5%, respectively, in a year. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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