Pentair Plc PNR has suspended operations in many of its major facilities due to lower production amid the coronavirus outbreak. The company has also withdrawn its guidance for the current quarter and for the year as well. The company’s previous earnings guidance did not reflect any negative impact of the coronavirus.
Pentair’s production was interrupted by the stay-at-home orders, as a result of which, it has been forced to reduce operations in several facilities. Additional disruption in the company’s production facilities and possible demand impact on Pentair’s products is difficult to predict at the moment due to the uncertain global economic environment.
Pentair is taking precautionary measures to ensure health and safety of its employees, while also taking actions to lower costs and expenses, reduce capital expenditure and managing working capital. Although the scale and magnitude of the outbreak is uncertain, the company’s robust balance sheet and sufficient liquidity poise it well to navigate through the turbulent situation.
The virus has become a major threat to public health worldwide, claiming thousands of lives. The outbreak has caused global economic uncertainties and supply-chain disruptions. Pentair’s businesses utilize a global supply chain, including materials, components and products sourced from China and from other countries and geographic regions which have been affected by the coronavirus outbreak. The company’s 3-4% of total revenues are generated from China, from where the outbreak originated.
In order to boost its growth rate, Pentair plans to make some incremental investments in the Aquatic Systems business. The company is focused on expanding digital transformation, innovation, technology and brand building. Pentair has undergone certain business restructuring initiatives aimed at reducing fixed cost structure and commenced business realignment. These actions will boost near-term margin growth. Further, productivity improvement and price hikes implemented to combat higher input costs will keep aiding the company. In addition, the company continues to expand particularly in the areas of pool and residential and commercial water treatment through acquisitions.
Share Price Performance
Pentair, along with John Bean Technologies Corporation JBT, belongs to the Manufacturing – Thermal Products industry. The company’s shares have depreciated 31.2% over the past year compared with the industry’s loss of around 18.7%.
Zacks Rank & Stocks to Consider
Pentair currently carries a Zacks Rank #4 (Sell).
Some better-ranked stocks in the Industrial Products sector include Sharps Compliance Corp SMED and Tetra Tech, Inc. TTEK. While Sharps Compliance Corp sports a Zacks Rank #1 (Strong Buy), Tetra Tech carries a Zacks Rank of 2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here.
Sharps Compliance has an estimated earnings growth rate of 767% for 2020. In a year’s time, the company’s shares have gained 36%.
Tetra Tech has an expected earnings growth rate of 10.7% for the ongoing year. In the past year, the company’s shares have appreciated 38%.
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