A month has gone by since the last earnings report for Pool Corp. (POOL - Free Report) . Shares have added about 3.3% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Pool Corp. 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 catalysts.
Pool Corp Q2 Earnings Top, Revenues Miss Estimates
Pool Corp reported mixed second-quarter 2019 results, wherein earnings surpassed the Zacks Consensus Estimate but revenues missed the same. While the bottom line outpaced the consensus mark after missing in the trailing two quarters, the top line lagged the same for the third straight quarter.
Adjusted earnings of $3.22 per share in the quarter exceeded the Zacks Consensus Estimate by a penny and increased 15% from the year-ago quarter number. Meanwhile, quarterly net revenues totaled $1,121.3 million, which fell short of the consensus mark of $1,155 million but improved 6% year over year.
Revenue growth can be primarily attributed to improved performance of the company’s Base Business. Additionally, favorable weather condition in the southeastern United States had a positive impact on the company’s results. However, these gains were negatively impacted by unfavorable weather in the company’s largest markets — California, Texas and Arizona.
Let’s delve deeper into the numbers.
Pool Corp reports operations under two segments — The Base Business segment (constituting majority of the business) and the Excluded segment (sale centers excluded from the base business).
Revenues at the Base Business segment increased 4.4% to nearly $1,103.4 million year over year. Also, operating income improved 5.8% to $171.6 million. Operating margin expanded 30 basis points (bps) from the year-ago quarter number.
The Excluded segment reported net revenues of $17.9 million, up from about $0.53 million registered in the prior-year quarter. The segment reported operating income of $0.93 million against the year-ago quarter’s loss of $0.11 million.
Operating Highlights & Expenses
Cost of sales in the second quarter increased 5.6% from the prior-year quarter. Gross profit, as a percentage of net sales, rose 30 bps to 29.5% from the year-ago figure driven by the Base Business’ solid performance.
Operating income increased 6.5% year over year to $172.5 million. Also, the operating margin expanded 10 bps to 15.4% from the prior-year quarter. Selling and administrative expenses too increased 7.6% year over year. Net income totaled $164 million, up from $148.4 million recorded in the year-ago quarter.
Adjusted EBITDA increased to $183 million in the quarter from $172 million in second-quarter 2018.
As of Jun 30, 2019, Pool Corp’s cash and cash equivalents amounted to $60.7 million compared with $42.2 million on Jun 30, 2018. Total net receivables, including pledged receivables, rose 3% and inventory levels grew 14% as of the same date compared with Jun 30, 2018. Its long-term debt summed $692.3 million, up 5.1% from the prior-year quarter. Goodwill decreased 0.2% year over year.
Cash provided by operations declined to $97.4 million in the quarter under review compared with $36.8 million used in the prior-year quarter. The upside can be attributed to payments for pre-price increase inventory purchases in 2018.
For 2019, Pool Corp expects EPS in the range of $6.09-$6.34 compared with prior guidance of $6.09-$6.39. The Zacks Consensus Estimate for current-year earnings is pegged at $6.2.
How Have Estimates Been Moving Since Then?
Fresh estimates followed a flat path over the past two months.
At this time, Pool Corp. has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Pool Corp. has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.