Why Is Pentair plc (PNR) Up 5.6% Since Last Earnings Report?

A month has gone by since the last earnings report for Pentair plc (PNR). Shares have added about 5.6% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Pentair plc 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 drivers.

Pentair Q3 Earnings & Sales Top Estimates, '21 View Up

Pentair reported third-quarter 2021 adjusted EPS of 89 cents, beating the Zacks Consensus Estimate of 84 cents. The bottom-line figure exceeded the upper range of its guidance of 81 cents to 85 cents. It also improved 27.1% from the 70 cents reported in the prior-year quarter on strong demand and record backlog levels.

Including one-time items, EPS came in at 86 cents compared with the prior-year quarter’s 66 cents.

Net sales improved 21.3% year over year to $969 million and surpassed the Zacks Consensus Estimate of $953 million. Excluding the impact of acquisitions, divestitures and currency translation, core sales grew 18% in the reported quarter.

The cost of sales advanced 21.7% year over year to $634 million. The gross profit in the reported quarter amounted to $335 million, up 20.6% from the prior-year quarter. The gross margin was 34.5% compared with the year-ago quarter’s 34.7%.

Selling, general and administrative expenses totaled $146 million compared with the prior-year quarter’s $130 million. Research and development expenses flared up 1.3% year over year to $22 million. The adjusted segmental operating income increased 28% year over year to $180 million. The segment margin was 18.5% in the reported quarter compared with the year-ago quarter’s 17.6%.

Segmental Performance

Net sales in the Consumer Solutions segment jumped 30% year over year to $614 million. The segment’s operating earnings increased 26.7% year over year to $144 million.

Net sales in the Industrial and Flow Technologies segment totaled $355 million, up 8.5% from the prior-year quarter. Operating earnings for the segment increased 22.7% year over year to $52 million.

Financial Update

Pentair had cash and cash equivalents of $173.2 million as of Sep 30, 2021 compared with $82.1 million as of Dec 31, 2020. Net cash flow from operating activities was around $540 million during the first nine months of 2021 compared with $501 million in the prior-year period. The company had a long-term debt of $701 million as of Sep 30 2021, down from $840 million as of Dec 31, 2020.

Guidance

Pentair has been witnessing robust growth in orders and ended the third quarter with backlog at record levels. Backed by this momentum, management hiked the adjusted EPS guidance for 2021 to a range of $3.34 to $3.40 from its previous estimate of $3.30-$3.40. Sales growth for the year is projected at approximately 22-23% on a reported basis, higher than the 21-23% growth projected earlier. The company has implemented price increases to counter the impact of cost inflation.

For the fourth quarter of 2021, the company expects adjusted EPS in the range of 81 cents to 87 cents. Pentair anticipates the current-quarter sales to be up approximately 15% to 19% on a reported basis from the prior-year period.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month.

VGM Scores

At this time, Pentair plc has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the top 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.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Pentair plc has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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