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Pool Corp (POOL) Stock Up on Q1 Earnings and Revenue Beat

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Pool Corporation (POOL - Free Report) reported first-quarter 2020 results, wherein earnings and revenues surpassed the Zacks Consensus Estimate. While the bottom line beat the consensus estimate for the fourth straight quarter, the top line surpassed the same for the third consecutive time. Following the results, the company’s shares gained 7.3% during trading hours on Apr 23.

Adjusted earnings of 71 cents per share in the quarter topped the Zacks Consensus Estimate of 65 cents and increased 20.3% from the year-ago quarter’s tally. Quarterly net revenues totaled $677.3 million, which surpassed the consensus mark of $636.5 million and increased 13.4% year over year.

Revenue growth can be primarily attributed to robust performance of the company’s Base business, primarily driven by strong demand for discretionary products and higher sales growth for construction materials and products used in the remodel and replacement of in-ground pools. Additionally, an extra selling day in the first quarter and early purchases from customers of the second quarter added to the upside.

Pool Corporation Price, Consensus and EPS Surprise

 

Segmental Performance

Pool Corp reports operations under two segments — The Base Business (constituting majority of the business) and the Excluded (sale centers excluded from the Base business).

Revenues at the Base Business segment increased 13.5% year over year to $667.8 million. However, operating income fell 7.9% to $35.9 million. Moreover, operating margin contracted 120 basis points (bps) from the year-ago quarter’s number to 6.6%.

The Excluded segment delivered net revenues of $9.5 million, up from $9.1 million registered in the prior-year quarter. The segment reported operating loss of $0.3 million compared with the year-ago quarter’s loss of $0.6 million.

Operating Highlights & Expenses

Cost of sales in the first quarter increased 15.3% from the prior-year quarter’s figure. Gross profit, as a percentage of net sales, declined 120 basis points (bps) to 28% from a year ago.

Operating income dropped 7% year over year to $35.6 million. Also, the operating margin declined 110 bps to 5.3% from the prior-year quarter’s level. Selling and administrative expenses inched up 8% year over year. Net income totaled $30.9 million, down from $32.6 million recorded in the year-ago quarter.

Balance Sheet

As of Mar 31, 2020, Pool Corp’s cash and cash equivalents amounted to $17.8 million compared with $28.6 million as on Mar 31, 2019. Total net receivables, including pledged receivables, rose 10% and inventory levels rose 5% year over year. Its net long-term debt amounted to $569.7 million, down 15.9% from the prior-year quarter’s level. Goodwill increased to $193.4 million compared with $188.5 million reported in the prior-year quarter.

In the first quarter of 2020, the company repurchased 362,000 shares for $66.6 million.

Despite the coronavirus pandemic, the company declared a 5% quarterly dividend hike. The company raised quarterly dividend to 58 cents a share from the previous payout of 55 cents. The raised dividend will be paid out on May 29, 2020, to shareholders on record as of May 15, 2020.

2020 Guidance

For 2020, Pool Corp expects earnings per share in the range of $5.45-$6.05 compared with the prior guidance of $6.47-$6.77. The Zacks Consensus Estimate for full-year earnings is pegged at $5.88 per share, which is above the mid-point of the company’s revised guidance of $5.74 per share. 

Zacks Rank & Key Picks

Pool Corp currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some better-ranked stocks in the Consumer Discretionary sector include Vista Outdoor Inc. (VSTO - Free Report) , JAKKS Pacific, Inc. (JAKK - Free Report) and Gaia, Inc. (GAIA - Free Report) , each sporting a Zacks Rank #1.

Vista Outdoor has a trailing four-quarter positive earnings surprise of 23.1%, on average. The company’s earnings beat estimates in two of the last four quarters.

JAKKS Pacific’s 2020 earnings are expected to rise 9.6%.

Gaia has a three-five year earnings per share growth rate of 15%.

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