Pool Corp (POOL) Q2 Earnings Beat Estimates, Increase Y/Y

Pool (NASDAQ:POOL) Corporation POOL reported solid second-quarter 2020 results, wherein earnings and revenues not only surpassed the Zacks Consensus Estimate but also increased on a year-over-year basis. While the bottom line beat the consensus estimate for the fifth straight quarter, the top line surpassed the same for the fourth consecutive time.

Adjusted earnings of $3.87 per share in the quarter topped the Zacks Consensus Estimate of $3.09 and increased 20.2% from the year-ago quarter’s tally. Quarterly net revenues of $1,280.8 million surpassed the consensus mark of $1,147 million and increased 14.2% year over year.

Notably, the upside can be primarily attributed to solid performance by the base business segment and Excluded segment. Moreover, relaxations on stay-at-home restrictions coupled with increased demand among the pool construction and remodel companies added to the upside.

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 11.5% year over year to $1,276.6 million. Operating income increased 18.9% year over year to $205.4 million. Moreover, operating margin expanded 60 basis points (bps) from the year-ago quarter’s number to 16.1%.

The Excluded segment delivered net revenues of $4.3 million, up from $3.4 million registered in the prior-year quarter. The segment reported operating income of $0.4 million against the year-ago quarter’s loss of $0.3 million. The segment’s operating margin came in at 9.9% against a negative 9.5% in the prior-year quarter.

Operating Highlights & Expenses

Cost of sales in the second quarter increased 14.7% from the prior-year quarter’s figure. Gross profit, as a percentage of net sales, declined 30 basis points (bps) to 29.2% from a year ago primarily due to increased sales of lower margin, big-ticket items, such as in-ground and above-ground pools and pool equipment, in the second quarter from the year-ago period.

Selling and administrative expenses inched up 6% year over year to $167.6 million.

Although operating income increased 19% year over year to $205.9 million, operating margin declined 70 bps to 16.1% from the prior-year quarter’s level.

Nonetheless, net income totaled $157.6 million, up from $131.3 million recorded in the year-ago quarter.

Balance Sheet

As of Jun 30, 2020, Pool Corp’s cash and cash equivalents amounted to $44.2 million compared with $60.7 million as on Jun 30, 2019. Total net receivables, including pledged receivables, rose 9% and inventory levels increased 10% year over year. Its net long-term debt amounted to $429.2 million, down 35.8% from the prior-year quarter’s level. Goodwill increased to $193.8 million from $188.7 million reported in the prior-year quarter.

During second-quarter 2020, net cash provided by operating activities came in at $201.5 million compared with $68.6 million in the year-ago period.

For the six months ended Jun 30, 2020 the company paid out cash dividends worth $45.3 million compared with $39.8 million in the prior-year quarter.

2020 Guidance

For 2020, Pool Corp expects earnings per share in the range of $7.05-$7.45 compared with the prior guidance of $5.45-$6.05. The Zacks Consensus Estimate for 2020 is currently pegged at $5.97.

Zacks Rank & Other Key Picks

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

Other top-ranked stocks in the leisure space include Brunswick (NYSE:BC) Corporation BC, YETI Holdings, Inc. YETI and OneWater Marine (NASDAQ:ONEW) Inc. ONEW, each sporting a Zacks Rank #1.

Brunswick has a trailing four-quarter earnings surprise of 8.4%, on average.

YETI Holdings has a three-five year earnings per share growth rate of 16.2%.

Earnings for OneWater are expected to surge 35.6% in 2021.

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