Pool Corporation (POOL) on Q1 2021 Results - Earnings Call Transcript
Operator: Good morning, and welcome to the Pool Corporation First Quarter 2021 Conference Call. All participants will be in listen-only mode. After today’s presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Mark Joslin, Senior Vice President and Chief Financial Officer. Go ahead, Mark. Mark Joslin: Thank you. Good morning, everyone, and welcome to our first quarter 2021 earnings call. I'd like to remind our listeners that, our discussion, comments and responses to questions today may include forward-looking statements, including management's outlook for the remainder of the year and future periods. Actual results may differ materially from those discussed today. Peter Arvan: Thank you, Mark, and good morning to everyone on the call. I simply could not be prouder of our team, or more energized by these results. As you saw this morning, we announced that our first quarter sales came in at $1.1 billion, which is the first time in our history that we have crossed the $1 billion mark in the first quarter. This represents a 57% increase over the same period last year, and was the result of strong demand and strong execution in virtually all our markets in North America, both blue and green, and even stronger market conditions and execution in Europe. Our dedicated and talented teams have worked very hard to ensure we provide the very best service to our customers, allowing them to help families enjoy the healthy outdoor living lifestyle that we support. From a geographic perspective, our four largest North American markets were strong. California saw a very robust 30% gain in the quarter. In Florida, we saw sales grow by 33%. In Arizona, sales grew by 29%, while Texas grew by 68% in the quarter. The February storm in Texas positively impacted our total sales by approximately 1% to 2% or $15 million to $20 million. Overall, these year-round markets are experiencing the same elevated demand and saw a 40% increase for the quarter, while seasonal markets sales increased by 66%, highlighting the strength and depth of the industry order backlog. Turning to product sales. No surprises here with equipment sales posting gains of 61% driven by strong demand for heaters, lighting pumps, filters, all used in the maintenance and construction and remodel of swimming pools. This is following the fourth quarter gains of 51%. Chemical sales were up 18% in the quarter, including the effects of the increased dichlor and trichlor product pricing resulting from the previously discussed industry supply shortages for these products. We are encouraged by this growth given that the installed base grew by approximately 2% overall, which highlights greater pool usage by homeowners. Building Materials sales increased 34% in the quarter, reflecting a very healthy demand for construction and remodeling products. Retail-related product sales were up 43% in the quarter, reflecting strong confidence by our dealers, and increased early buy activity compared to last year. We believe that new pool construction was approximately 96,000 units in 2020. And with very strong permit data from our major markets, we are anticipating that 2021 new pool construction will exceed 110,000 units for the first time since the Great Recession, but still well below historical peak levels. Mark Joslin : Thanks Pete. I'm going to start by commenting on the change in our guidance range for the year, which at the midpoint is up 30% from the guidance we gave on our year-end call just over two months ago. So, what changed in that relatively short period of time? The answer is there are a number of reasons for a more optimistic outlook, which I'll describe in order of magnitude. First is our very strong Q1 results, and our short-term expectations as we move into the second quarter, despite relatively average US weather Q1 market conditions built on the exceptionally strong 2020 end of year, and we're able to capitalize on that to deliver phenomenal results. This momentum has continued into the second quarter and taken together is meaningfully better than what we expected in February. Second, we've seen an acceleration in inflationary price increases announced by our vendors over the last couple of months roughly doubling the inflationary impact we expect to see for the year from our earlier guidance of 2% to 3% on average across our product portfolio to 4% to 5% now. As under price increases are primarily pass-throughs in the pool industry, these increases should add to our sales and gross profit opportunity for the year. Third, we have more clarity on positive external factors impacting our business throughout the remainder of the year. These factors include our increased confidence that new normal will be many more people working from home in the future than in the past with greater focus on home improvement spending. This spending will be fueled in the short-term by favorable homeowner dynamics, including rising home valuations, low interest rates, a healthy job market, government stimulus and greater millennial participation in the housing market. Operator: We will now begin the question-and-answer session. The first question comes from Ryan Merkel from William Blair. Ryan Merkel: Hey everyone. Congrats on another strong quarter. Mark Joslin: Good morning. Peter Arvan: Good morning Ryan. Thank you. Ryan Merkel: So first off typically the first quarter is 11%, 13% of EPS for the year. And I'm wondering will seasonality be different this year? And was there anything in the first quarter that won't repeat? Mark Joslin: Well Ryan I don't know that seasonality will be different per se. Obviously the year started off well and weather was relatively cooperative. In terms of not repeating, we've lapped now the expense reductions that we had last year which began with -- really with the second quarter last year, things like travel, and meeting expenses, some of the restraints on hiring, advertising expenses. So, we won't have those operating expense benefits. But from a sales standpoint nothing really different going forward from a seasonality view. Ryan Merkel: Okay. That's helpful. And then you mentioned chemical -- the chemical business is up 18%. How much of that was price? And I don't know do prices -- do they improve for the year for chemicals, or are we at this higher level now and it will just stay here? Mark Joslin: Yes. Prices vary in -- by parts of the country. I mean overall, I would tell you the price on dichlor and trichlor which is the product that was impacted by the shortage, they're up about 60%. So if you think about how that's going to shake out for the balance of the year? It will probably remain at elevated level because I believe that the industry is going to be short for the season. Now that simply means that, people are going to move their method of sanitization to another product either a granular product or a liquid product. But there's no shortage of ways to sanitize the pool. It just simply means at a certain point people will shift. We've also seen certain parts of the country accelerating the use of salt as a method of sanitization too. Ryan Merkel: Right. Okay. And just lastly and I'll turn it over. You mentioned Texas. I think you said it was maybe $20 million in the quarter. Will there be more for Texas in the second quarter, or was that just a one quarter event? Mark Joslin: Are you talking about the ASU benefit? Ryan Merkel: No. The Texas storms I thought you mentioned Mark Joslin: Oh Texas. I'm sorry I thought taxes too. Peter Arvan: Yes. So Ryan I think it's best we can tell, it's about halfway done. And I think that there was some initial triage that was done to get some water moving, but there's still a product shortage on some things, so that when products are available then they'll have to go back. So, we think that it's about halfway done. Ryan Merkel: Got it. That’s helpful. Thanks. Peter Arvan: Thank you. Operator: The next question comes from David Manthey from Baird. David Manthey: Hi, good morning guys. I'm under the assumption that the majority of the overage you're seeing in the off-season here is new pools and major renovations in the Sunbelt as opposed to a massive influx of just higher pool usage. First of all, is that how you're thinking about it? And then as it relates to the new pools versus major renovations, I don't know to the extent you can discern between those? Are you seeing trends one way or the other that might give us an indication about how things will play out in the future? Peter Arvan: Yeah. Let me try and take a crack at that. So the -- if I think about it from a -- you mentioned in the Sunbelt a lot of construction and remodel. That is absolutely true. So the backlogs in the Sunbelt for both of those things are very strong. The seasonal markets also have a very strong backlog. And because of the -- frankly I think it was as much because of the backlog because the weather was I would call average for us. Because of that, I think people kept working in as best they could and/or started earlier. So what we've seen is a big increase in new pool construction. And we've also seen a big backlog in the remodel. Now as it relates to usage the only way that we look at that is what's going on in the maintenance side. So we use chemical usage as a proxy for that. And as I mentioned in my comments with the installed base only being up about 2%, the fact that the chemical usage was up by like 18 that leads us to believe that more people are using the pools, which is good for the maintenance part of our business. Does that answer what you're looking for? David Manthey: It does. And the 18 includes price too, right or no? Peter Arvan: Correct. David Manthey: It does. Okay. Okay. Thank you for that. And you discussed some of the supply chain constraints and labor constraints at your customers and your suppliers. And for your business it's, obviously, easier to absorb excess activity into the system in the fourth quarter and the first quarter than it is in the main selling season. Can you talk about the status of your capacity creation initiatives and how you're positioned to absorb incremental activity in the second and third quarter of this year? And then related those capacity creation initiatives, do those potentially soften downside decremental margins if activity levels slow by their nature? Peter Arvan: Okay. That's a lot. So let me see if I can get you what you're looking for. As far as the capacity creation and the run rate that we're seeing, you have to consider that -- you really can't think through that unless you parse it into seasonal markets and year-round markets. So the year-round markets are very busy right? But they're busy with construction and remodel, because in places like Dallas, Texas and such there aren't a whole lot of people swimming yet. But there's a lot of construction going on. So we'll see an uptick in those areas in the products that are used in the maintenance products if you will. So our chemical spend if the water warms up, chemical spend will go up significantly in the seasonal markets as people start using the pools more -- I'm sorry in the year-round market. So people even this time of year usage is vastly diminished over what it is in the summer months except for places like South Florida. So what we'll see is that there'll be -- there'll continue to be an increase and the capacity creation initiatives that we have will continue to pay dividends in both those markets because the nature of the business will shift. So POOL360 for instance will be -- will continue to be a big part of our productivity result. The truck utilization, the velocity slotting all of those things continue to help us. They simply add capacity to us and hold the cost levels from increasing nearly as fast as the revenues are. Mark Joslin: Yeah. In terms of the second part of your question that's an interesting question. So I guess it was -- if there is a recession let's say and some slack in demand, does the capacity creation initiatives result in less downside, which we'd have to think about a little bit. It's interesting. I tend to think of less demand the fact that we have so much of our business tied to maintenance as well as the leverage we have in our model, which has a fair amount of incentive compensation that goes down in a kind of downside environment. But I don't know, instead of adding a person when demand picks up, we don't have that person to let go let's say when the volume drops. So, I don't necessarily see the capacity creation softening the downside. David Manthey: Okay. All right, that’s helpful guys. Thank you. Mark Joslin: Sure. Thanks. Operator: The next question comes from Anthony Lebiedzinski with Sidoti & Company. Anthony Lebiedzinski: Good morning and thank you for taking the questions. So, first, Mark congratulations on your pending retirement. So, as far as inflation, so I know you mentioned that you're riding your forecast of 4% to 5% for the year. Was that where you were in the first quarter? I just wanted to just circle back to just to firm that up. Mark Joslin: Yes. Thank you Anthony for your kind words. The first quarter was less. So, some of the price increases that we've seen as we said we raised our guidance just in the last two months. So, we're looking at 2% to 3% kind of across the board coming into the year which is what I would say our first quarter saw in terms of inflation. And then price increases have been announced by a fairly wide variety of vendors with some different implementation dates but generally late first quarter into early second quarter. And so as we look at those and the overall impact on the year we think it's now at the 4% to 5% range. Anthony Lebiedzinski: Got it. And then so Pete you mentioned before that the overall cost of a new pool is most of that are tied to labor. Are any of the pool builders that you're -- you guys work with? I mean are they seeing signs of labor and wage inflation? Just curious in regards to that and how could that possibly in the future impact demand for pools? Peter Arvan: Yes, I think the labor market has been tight for quite some time. So, there are certain positions that are in short supply for virtually every business drivers for instance. In the construction trade though, I mean, labor has been tight for quite some time. There's certainly been some inflation on that side, but I haven't heard of crazy increases. So, I don't know that even the inflation that they're seeing on labor would act as a throttle on demand at this point. Anthony Lebiedzinski: Got it. Okay. And in terms of the product shortages, I mean, if you could just talk about the top areas we're seeing or expecting to see some product shortages. Thanks. Peter Arvan: Yes. As I mentioned certainly chemicals the 3-inch trichlor and dichlor tabs are probably at the top of the list from an industry-wide shortage position. We -- if you go into the equipment category so heat is in very high demand and frankly has been for almost a year now. But again this is where we really distinguish ourselves for our customers. Because if many of our competitors may have one or two locations in a market and if they don't have it they simply don't have it. But given the density that we have in most of the major markets, if I don't have it in one location chances are I have it in another location or I have another brand. So, the dealers are becoming much more brand agnostic for the products that are in the highest shortage position which has been good for them and good ultimately for the pool owner that wants to use the pool. Anthony Lebiedzinski: Got it. Okay. Thank you and best of luck. Peter Arvan: Thanks. Operator: Our next question comes from Alex Maroccia from Berenberg. Alex Maroccia: Good morning guys. Thanks for taking my questions. The first one is a follow-up on the previous question regarding capacity and at company level. Given the current ramp in new pool construction, when do you think we get to a point where you need to expand existing locations, add another centralized shipping site, or make some other expansion decisions to fulfill demand? And I asked this because I wasn't covering the company back in the early 2000s when new pool construction peaked. So I'm just not sure how you manage capacity back then, if it was any different. And I'm just trying to figure out if something's changed. Peter Arvan: Sure. So as I mentioned, new pool construction last year was 96,000 units. And it was about a 23% increase. I think this year, given the strong demand, it will be 110,000 plus. If you think about historically how POOLCORP has grown, we've grown by continuing to expand our network. So we try and add capacity within the four walls and grow the business, which was what creates the operating leverage that we've been able to do. But at a certain point, as new pool construction continues to grow and the installed base continues to grow, proximity of our locations to those pools matters. So there's two reasons for us to expand our footprint. One is, we're simply out of capacity. And then, when we look at the geographic circle that an individual branch or sales center covers, we simply look at and say, all right, where is the market growing? We take a piece of the existing branch. That becomes seed business for the new branch and we push it out further and closer to where the pool density is increasing. That takes load off of the existing branch, which allows them to grow again. And then, by having a new sales center on the ground in a new growing area that allows us to grow. Alex Maroccia: That's extremely helpful. Thank you. And then, second question is just on the guidance for the rest of the year. Do you see a possibility for a flat to higher Q4, now that you've got better visibility into contracted backlogs? Mark Joslin: I think Q4 will be a challenge, frankly, but flat to positive is certainly not out of the cards. I wouldn't bet on that, but it's possible. But again, we're -- I mentioned the comps, that's a really tough comp. We had very favorable weather. Weather is always an important factor in our business, particularly in the shoulders of the season. And if we have similar weather then, okay. I would -- with the inflation and the acquisitions that certainly helps our optimism about the Q4 performance. Alex Maroccia: Okay. That’s all for me. Thank you. Mark Joslin: Thank you. Operator: Our next question comes from Ken Zener from KeyBanc. Ken Zener: Good morning, everybody. Mark Joslin: Good morning. Peter Arvan: Good morning, Ken. Ken Zener: Wow, Mark congratulations. And Melanie, I'm sure you're listening, so congratulations to you. Mark Joslin: We thank you. Peter Arvan: Thank you Ken Zener: Yes. I'm sure you're going to go painting, obviously. This isn’t roofing kit from your old industry, yet the backstop attraction of the pool is that a lot of this is a recurring, right, revenue model in terms of maintenance. So just amazing results. And I'm with the -- homeowners have more money, there's a lifestyle focus outdoors. In our view, all the money is tied to rising homeowners equity. But I -- can you just walk us through and update us, because it is remarkable. In terms of construction versus remodeling, what is the current landscape of -- to support what Mark has been talking about on the new construction side, what is generally your impression of how people finance or purchase pools, as opposed to the repair or the remodel, which I assume is strictly out of pocket? Can you give us a little background on that, just so we can have a context for how this demand is being funded? Peter Arvan: Yes. That's a good question, Ken. I think, it varies, of course. Historically, there is a second mortgage market, which did a lot of the financing for pools. That market doesn't exist in the same form. However, there's a lot of home equity out there that consumers have tapped into with home equity loans, lines of credit. And they're using that for expansions of the home environment, remodeling and additions. At the same time, the stock market has been healthy as you know. And so, people have more discretionary spending coming from that. They've cut back other discretionary expenses. So I would say, in general, there's more discretionary funds that people have available. But at the same time, they're taking advantage of, let's call it easy financing from home values, which have accelerated significantly over the last several years. So it's a combination and it's – roughly, my guess would be 50% to 60% of new pool purchases, which are big spends, right? So the pool itself might be $40,000 to $50,000, and then you throw in the landscaping and patio, and maybe some furniture could be $80,000 $100,000 spend. And for most people that would be some financing involved in getting that spend completed. Ken Zener: And then – I appreciate that. So I finally completed my pool here, and gave you guys copious amount some money. And during that process, because there are a lot of different SKUs that are in that process, heaters thank goodness I got mine four months ago, because now they're backlog in a lot of cases. How much share do you think you're getting from these smaller distributors? Because where I'm in Northern California, there's two real competitors for you generally speaking. But I mean, they don't have the product necessarily that you do. So, how much share gains do you think are embedded in your current 20% guidance this year? If there's four or five points of price that means the market is 15. I mean, you must be gaining share. And how do you think about that? How do you measure that operationally? Peter Arvan: Yeah. It's a – share as you know, because there's not any external reporting that everybody reports into similar to other industries. So it's basically an estimate. So every time they – excuse me – update the market and new pool construction then we – basically that starts our work to try and back into what's going on from a share perspective. So what I can tell you Ken is, we are – we are very confident that we are taking share. And the reason we're taking share as I mentioned before, it's simply the strength of the network, because we have more options for any dealer than anybody else bar none. What's difficult though is to say at this stage, how much of it is – is pure share gain. So we're confident that, we're taking share in a considerable amount, I would bet. But not – we're not certain enough for me to blurt out a number to you just yet. Ken Zener: Right. Yes. I mean, I couldn't get stuff from other people. So even though you were raising prices. Operationally, because you do have people right out in the branches and they're very, very, very busy. And you're doing things like COVID, right, training on top of all of that stuff. Obviously POOL360 is helping efficiencies. But, how are you managing the employee base here? Are you seeing higher turnovers given how hard they're really working and how much productivity you're getting through the system? And how are you really changing the system, so you don't bring those people out? Thank you very much. Peter Arvan: Yes. That's a very good question. So we actually – part of – as you remember, I have four operating pillars, right, safety, growth, profitability and employer of choice. So employer of choice is where this activity that you're talking about comes into play. So it starts out with making sure that we have the right resources, and frankly that you have a plan. So the – if you look at the depth of our experience bench at the leadership level, whether you're talking about the region manager or the general managers, these folks have been doing it for a very long time. And even though you're busy, when you're organized and when you're structured and you have a plan, it just works. Now we're busier certainly, no question. But it's about organization and structure and tools. So the efforts that we put on capacity creation, whether it's, the velocity slotting in the warehouse or POOL360 training or BlueStreak. All of those things for instance, we did a lot -- even as busy as we were in the first quarter. Our first quarter results will pale in comparison to the second quarter. So that's where we had time and even in the fourth quarter to work on some of those things, so that they pay dividends for us as we ramp up and get even busier. It's a process. We don't take for granted the dedication and the hard work of our folks. The results that we posted are -- would be impossible without people working very, very hard and very good leadership. But I think our bonus plan rewards those folks, right? Because it's a total add them up for everybody. So the better the company does then the better they do. So I think it's a lot of things that we use to make sure that the team stays energized and equipped. Ken Zener: Thank you. And then, Mark, your 20% growth, I think is what you said -- could you -- just when you said 2Q or 1Q were pale in comparison to 2Q it's kind of an impressive statement. But the 20 -- you talked 20% that's your top line sales correct which includes the four to five points of inflation? Mark Joslin: Yes. And I think the one though with the 2Q -- Q1 paling in comparison to Q2 refer to back. But from a sales standpoint, yes, the 20% is overall for the year, which obviously includes our first quarter which was very strong. It includes inflation expectations for the remainder of the year. It includes the acquisitions that we have completed and also the kind of comps that we have as I mentioned, the last year's growth rates. Ken Zener: Right, with 4Q being in a flat range. Mark Joslin: Right. Ken Zener: Amazing. All right. I'll talk to you guys soon. Thank you so much. Mark Joslin: All right, Ken. Thank you. Operator: The next question comes from Garik Shmois from Loop Capital. Garik Shmois: Great. Thanks and congrats on the results. First question is just on the gross margin outlook. Previously you had expected margins to be up in the first half down to the second half maybe a little bit more significantly. Even now just with the improved gross margin outlook, it sounds like you're getting some pricing ahead of inflation here. But should we still think of maybe directionally the kind of the order of magnitude as being consistent with your prior expectations? Mark Joslin: Yes, that's correct. I mean it wasn't a big change in outlook. It went from 20 to 40 down to flat to 20 down. So basically a 20 basis point improvement in expectation. And definitely the trajectory of that would be better earlier and more difficult later, particularly the fourth quarter, I think our fourth quarter gross margin improvement was around 160 basis points last year, so significant. And that will be very surprising to get close to that number this year. Garik Shmois: Okay. Thanks. Second question is just on the revenue outlook. Just curious how you'd answer the question just around with the economy opening up, it seems like more people are certainly looking to take vacations in the summer. Will you anticipate more on the non-discretionary piece just because the new pool construction side is so strong and backlogs are full and the work is going to continue through the year? But is there any risk to air pocket in the summer months around people taking vacations for the first time in over a year, and they might end up skipping a bit on some of the nondiscretionary aspects of pool maintenance? Peter Arvan: Yes. I don't think you can -- especially in the summer months when the water is hot, you simply can't say, well, I'm not going to -- we're going on vacation, so I'm not going to run the pool, or I'm not going to put chemicals in the pool. You simply can't because it turns green and frankly then becomes a very difficult thing to return back to normal. So I don't think that's the case. I guess, the way I think about it is these projects are long-term investments, right? It's not a question of whether I want to go on a vacation or not, which tends to be a shorter-term decision. That and many of these folks that are about to have their pools started, if somebody's starting your pool today, I promise you that that contract was signed a long time before today. So the contracts that people are signing are really for future installation. And there -- this is typically a large investment. So I don't really think that even with -- if people start to travel and say, I'm going to jump on a plane and I'm going to go somewhere on vacation, we don't really see that altering their plans for an investment project in the backyard. Garik Shmois: Great. That's helpful. Last question is just on the commercial business recognizing it's about 4% of revenues. But just curious as to anything that in particular that contributed to the turnaround there? Peter Arvan: I think it's fairly broad-based. It wasn't like a lot of large projects broke. I think you had hotels, which in March last year were essentially shuttered. So people are traveling and bodies of water are in use, because remember a year ago there was questions about the safety of the pool and such. So I don't think it was any one large thing. I just think it's the economy is opening up a little bit. People are starting to travel more. There -- and the public pools have been deemed safe as long as they're treated properly. So I think it's just that. Garik Shmois: Great. Thanks again. Best of luck. Peter Arvan: Yep. Thank you. Mark Joslin: Thank you. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Peter Arvan for any closing remarks. Peter Arvan: Great. Thank you. In closing, I would like to extend my sincere thanks to the entire POOLCORP family and to our customers and suppliers, because without their combined effort these extraordinary results would not have been possible. Thank you for joining us on our call today, and we look forward to reviewing our second quarter results with you on July 22. We hope everybody have a great day. Thank you. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.POOL Ratings Summary
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Related Analysis
Pool Corporation (NASDAQ:POOL) Showcases Strong Financial Performance in Q3 Earnings
- Earnings Per Share (EPS) of $3.28, surpassing estimates and indicating a robust financial performance.
- Revenue Generation of approximately $1.43 billion, exceeding expectations and showcasing the company's market strength.
- Financial Health Indicators such as a price-to-earnings (P/E) ratio of 32.06 and a debt-to-equity ratio of 0.87, reflecting solid financial foundation and market position.
Pool Corporation (NASDAQ:POOL) is a leading distributor of swimming pool supplies, equipment, and related leisure products. The company operates within the Zacks Leisure and Recreation Products industry, competing with other firms in the sector. On October 24, 2024, POOL reported its third-quarter earnings, showcasing strong financial performance.
POOL reported earnings per share (EPS) of $3.28, surpassing the estimated $3.15. This marks a 3.49% surprise over the expected figures, as highlighted by Zacks. However, this EPS is slightly lower than the $3.50 reported in the same quarter last year. Despite this, POOL has exceeded consensus EPS estimates three times in the past four quarters.
In terms of revenue, POOL generated approximately $1.43 billion, exceeding the estimated $1.40 billion. This represents a 2.02% surprise over the Zacks Consensus Estimate. However, it is a slight decrease from the $1.47 billion reported in the same period last year. POOL has outperformed consensus revenue estimates twice in the last four quarters.
POOL's financial metrics indicate a strong market position. The company has a price-to-earnings (P/E) ratio of 32.06, suggesting investors are willing to pay $32.06 for every dollar of earnings. The price-to-sales ratio is 2.71, and the enterprise value to sales ratio is 2.93, reflecting the company's valuation relative to its sales.
The company's financial health is further supported by a debt-to-equity ratio of 0.87, indicating a moderate level of debt. Additionally, a current ratio of 2.39 shows POOL's strong ability to cover short-term liabilities with short-term assets. These metrics highlight POOL's solid financial foundation and its ability to navigate market challenges effectively.
Pool Corporation (NASDAQ:POOL) Showcases Strong Financial Performance in Q3 Earnings
- Earnings Per Share (EPS) of $3.28, surpassing estimates and indicating a robust financial performance.
- Revenue Generation of approximately $1.43 billion, exceeding expectations and showcasing the company's market strength.
- Financial Health Indicators such as a price-to-earnings (P/E) ratio of 32.06 and a debt-to-equity ratio of 0.87, reflecting solid financial foundation and market position.
Pool Corporation (NASDAQ:POOL) is a leading distributor of swimming pool supplies, equipment, and related leisure products. The company operates within the Zacks Leisure and Recreation Products industry, competing with other firms in the sector. On October 24, 2024, POOL reported its third-quarter earnings, showcasing strong financial performance.
POOL reported earnings per share (EPS) of $3.28, surpassing the estimated $3.15. This marks a 3.49% surprise over the expected figures, as highlighted by Zacks. However, this EPS is slightly lower than the $3.50 reported in the same quarter last year. Despite this, POOL has exceeded consensus EPS estimates three times in the past four quarters.
In terms of revenue, POOL generated approximately $1.43 billion, exceeding the estimated $1.40 billion. This represents a 2.02% surprise over the Zacks Consensus Estimate. However, it is a slight decrease from the $1.47 billion reported in the same period last year. POOL has outperformed consensus revenue estimates twice in the last four quarters.
POOL's financial metrics indicate a strong market position. The company has a price-to-earnings (P/E) ratio of 32.06, suggesting investors are willing to pay $32.06 for every dollar of earnings. The price-to-sales ratio is 2.71, and the enterprise value to sales ratio is 2.93, reflecting the company's valuation relative to its sales.
The company's financial health is further supported by a debt-to-equity ratio of 0.87, indicating a moderate level of debt. Additionally, a current ratio of 2.39 shows POOL's strong ability to cover short-term liabilities with short-term assets. These metrics highlight POOL's solid financial foundation and its ability to navigate market challenges effectively.
Pool Corp Price Target Boosted at Stifel
Stifel analysts increased their price target for Pool Corp (NASDAQ:POOL) to $335 from $310, while maintaining a Hold rating on the stock. The analysts highlighted Pool Corp's strong positioning in the U.S. pool market, with a 37% market share in wholesale distribution, and its significant resources to further solidify its leadership.
However, they cautioned that while expectations have been adjusted to reflect fiscal 2024 challenges, the company's current valuation leaves little room for error, particularly given a potentially muted recovery and elevated expenses.
The analysts believe that Pool Corp's stock is likely to remain range-bound, influenced by interest rate sentiment, with stability in 2024 being crucial for sustained investor interest.
Pool Corp Price Target Boosted at Stifel
Stifel analysts increased their price target for Pool Corp (NASDAQ:POOL) to $335 from $310, while maintaining a Hold rating on the stock. The analysts highlighted Pool Corp's strong positioning in the U.S. pool market, with a 37% market share in wholesale distribution, and its significant resources to further solidify its leadership.
However, they cautioned that while expectations have been adjusted to reflect fiscal 2024 challenges, the company's current valuation leaves little room for error, particularly given a potentially muted recovery and elevated expenses.
The analysts believe that Pool Corp's stock is likely to remain range-bound, influenced by interest rate sentiment, with stability in 2024 being crucial for sustained investor interest.
Pool Corporation Shares Drop 10% on Revised 2024 Earnings Guidance
Pool Corporation (NASDAQ:POOL) experienced a significant drop of over 10% intra-day today following a revision of its 2024 earnings guidance due to reduced demand during the swimming pool season.
Recognizing the critical importance of the second quarter for its annual performance, Pool adjusted its expectations for both the second quarter and the entire 2024 fiscal year. Consequently, the company has lowered its projected diluted EPS range for the full year to $11.04 to $11.44 per share, down from the previous range of $13.19 to $14.19.
Peter D. Arvan, CEO of Pool, highlighted that recent data on pool permits indicates persistently weak demand for new pool construction. As the peak selling season draws to a close, the company now forecasts a 15% to 20% decline in new pool construction activity for the year, with remodel activity potentially decreasing by up to 15%.
Pool Corporation Shares Drop 10% on Revised 2024 Earnings Guidance
Pool Corporation (NASDAQ:POOL) experienced a significant drop of over 10% intra-day today following a revision of its 2024 earnings guidance due to reduced demand during the swimming pool season.
Recognizing the critical importance of the second quarter for its annual performance, Pool adjusted its expectations for both the second quarter and the entire 2024 fiscal year. Consequently, the company has lowered its projected diluted EPS range for the full year to $11.04 to $11.44 per share, down from the previous range of $13.19 to $14.19.
Peter D. Arvan, CEO of Pool, highlighted that recent data on pool permits indicates persistently weak demand for new pool construction. As the peak selling season draws to a close, the company now forecasts a 15% to 20% decline in new pool construction activity for the year, with remodel activity potentially decreasing by up to 15%.
Pool Corporation Initiated With Outperform at RBC Capital
RBC Capital initiated coverage on Pool Corporation (NASDAQ:POOL) with an Outperform rating and a $408 price target.
The analysts said they’re drawn to the company's potential for long-term growth as the leading wholesale distributor in an industry that benefits from migration to warmer climates where there is a higher tendency for pool ownership and backyard living features, as well as spending on technology-enabled pool content.
The company's growth mainly comes from recurring revenue generated by maintenance and minor repair work on a continually increasing number of installed US pools, as well as remodeling and retrofitting work, given that the average US pool is 22 years old.
The company aims to achieve a 6%-9% organic revenue CAGR in the long run, which aligns with its eight-year historical trend (2012-2019), except for the extraordinary growth it experienced in 2020-22 due to the pandemic. The growth drivers include the increase in the overall number of installed pools, favorable pricing and product mix from higher-value technology pool content, gaining market share, opening new sales centers, and expanding the product line.
