Strong Base Business To Aid Pool Corp (POOL) In Q2 Earnings

Pool Corporation (NASDAQ:POOL) is slated to report second-quarter 2019 results on Jul 18, before the opening bell.

The company’s continual expansion strategies and acquisitions are likely to have driven top-line growth in the to-be-reported quarter. Also, ongoing improvement in its base business is likely to have resulted in increased profits in the second quarter.

Pool Corp’s market-leading position offers a cost advantage, allowing it to generate higher return on investment than smaller companies. Further, its leadership position provides the scope to benefit from the flourishing housing market.

Notably, the company’s shares have gained 24.7% so far this year compared with the industry’s 18% rally.

Let us find out how its top and bottom lines will shape up in the second quarter of 2019.

Strong Base Business to Facilitate Top-Line Growth

In 2018, Pool Corp’s net sales increased 7.5% year over year. Further, in the first quarter of 2019, the company’s net sales improved 2% on a year-over-year basis. Given strong base business growth, we believe that the upside trend is likely to have continued in the second quarter as well. Subsequently, the Zacks Consensus Estimate for the company’s revenues in the second quarter is pegged at $1.16 billion, suggesting a 9.2% increase from the year-ago quarter’s reported figure.

Meanwhile, the company’s revenues derive a great deal from expansions. Pool Corp plans to foray in newer geographic locations, expand in existing markets and launch product categories, which will likely boost market share. The company completed six acquisitions in the last year.

Also, Pool Corp generates a large portion of revenues from existing pools. The company’s existing pool business witnessed revenue growth throughout 2015, 2016, 2017 and 2018. The upside was mainly aided by higher replacement activities. The trend is expected to have continued in the second quarter of 2019 as well.

Earnings Picture Encourages

Despite high costs of operations, Pool Corp’s robust revenue growth in the base business is likely to have driven profits in the second quarter of 2019. In the first quarter of 2019, gross profit margin increased 90 basis points (bps) to 29.2% from the prior year, driven by a robust base business. Operating income increased 14.4% year over year to $38.4 million. Also, operating margin expanded 70 bps to 6.4% from the prior-year quarter.

We believe that in the second quarter of 2019, Pool Corp is likely to witness earnings growth. Hence, the company’s earnings are expected to be $3.21 per share for the second quarter, suggesting a 14.6% increase from the prior-year quarter’s reported figure.

What Does the Zacks Model Unveil?

Our proven model does not predict that Pool Corp is likely to beat earnings estimates this quarter. This is because a stock needs to have both — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — for this to happen. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Pool Corp has an Earnings ESP of -4.05% and a Zacks Rank #3 at present, which make surprise prediction difficult. You can see the complete list of today’s Zacks #1 Rank stocks here.

Pool Corporation Price and EPS Surprise

Stocks With Favorable Combinations

Here are a few stocks from the Consumer Discretionary sector that investors may consider as our model shows that these have the right combination of elements to post an earnings beat in the second quarter:

Marriott Vacations (NYSE:VAC) has an Earnings ESP of +2.13% and it currently carries a Zacks Rank #2. The company is scheduled to report quarterly numbers on Jul 31, after the market closes.

SeaWorld (NYSE:SEAS) has an Earnings ESP of +11.01% and a Zacks Rank #3 at present.

Melco Resorts (NASDAQ:MLCO) currently has an Earnings ESP of +27.12% and a Zacks Rank #3.

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