Pentair (PNR) Beats On Q1 Earnings And Revenue Estimates

Pentair plc (NYSE:PNR) reported first-quarter 2017 adjusted earnings of 65 cents per share, a 6.6% increase from the year-ago quarter. Earnings also beat the Zacks Consensus Estimate of 61 cents.

Including one-time items, the company reported earnings of 44 cents per share, down 12% from 50 cents recorded in the year-ago quarter.

Net sales decreased 1% year over year to $1.184 billion. However, the figure surpassed the Zacks Consensus Estimate of $1.141 billion. Excluding the unfavorable impact of currency translation, core sales declined 1%.

Cost of sales advanced 0.3% to $761 million in the quarter from $758.7 million in the year-ago quarter. Gross profit in the reported quarter was $422.3 million, down 2% from $431.3 million recorded in the prior-year quarter. Gross margin contracted 50 basis points (bps) year over year to 35.7% in the quarter.

Selling, general and administrative expenses inched up 1.6% year over year to $253.9 million. Research and development expenses rose 5.3% to $30 million. Adjusted operating income went up 3% to $184 million from $182 million in the year-ago quarter. Operating margin expanded 20 bps to 15.5%.

Segmental Performance

Sales from the Water Quality Systems segment climbed 2.6% year over year to $682.9 million. Operating earnings increased 14.6% to $116 million.

The Electrical segment reported revenues of $502.2 million, down 4.3% from the year-earlier quarter. Segment operating earnings were down 8.2% year over year to $103.5 million.

Financial Update

Pentair had cash and cash equivalents of $238 million at the end of first-quarter 2017 compared with $238.5 million at the end of 2016. The company recorded cash used for operating activities of $88.7 million in the reported quarter compared with cash usage of $17.7 million recorded in the prior-year quarter.

Free cash flow usage in first-quarter 2017 was $112 million compared with cash flow usage of $45 million in the year-ago quarter. Pentair paid dividends of 34.5 cents per share in first-quarter 2017. In Dec 2016, Pentair approved a 3% hike in the annual cash dividend rate for 2017 to $1.38.

Pentair previously announced that it has entered into a Share Purchase Agreement to sell its Valves & Controls business to Emerson Electric Co. (NYSE:EMR) for $3.15 billion, subject to certain customary adjustments. The results of the Valves & Controls business, which were previously reported as a stand-alone reporting segment, have been presented as discontinued operations for all periods.

Guidance

Pentair reaffirmed its full-year 2017 adjusted EPS guidance range of $3.45–$3.55. The company raised the outlook for full-year revenues to approximately $4.8 billion from the prior view of $4.7 billion. It also guided second-quarter 2017 adjusted EPS guidance range of 97–99 cents. The company projects second-quarter revenues to be approximately $1.24 billion, which would be down approximately 5% on a reported and core basis compared to second-quarter 2016 revenue.

Share Price Performance

Pentair outperformed the Zacks classified Machinery-Thermal Products sub-industry with respect to price performance in the past one year. The stock gained 12.9%, while the industry recorded growth of 9% over the same time frame.

Zacks Rank

Pentair currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the same sector are Donaldson Company, Inc. (NYSE:DCI) and Casella Waste Systems, Inc. (NASDAQ:CWST) . Both of them flaunt a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Donaldson Company has an average positive earnings surprise of 5.93% for the trailing four quarters. Casella Waste generated an outstanding average positive earnings surprise of 165.21% in the past four quarters.

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