Shares of Pentair Ltd. (PNR) gained around 4.5% and closed at $63.71 yesterday after the company provided its financial outlook for 2015, while reaffirming its fourth-quarter and 2014 sales and earnings outlook.
For 2015, Pentair guided adjusted earnings per diluted share (EPS) in the range of $4.20 to $4.35. Adjusted EPS outlook reflects an increase of 13% to 17% from the mid-point of the 2014 adjusted EPS outlook. The company also anticipates 2015 sales to be approximately $7.2 billion, or up 2% to 4% on a core basis compared with estimated 2014 sales.
Along with modest global GDP growth, Pentair expects to deliver solid margin expansion and free cash flow well above net income, in 2015. The company also hopes to generate greater than $925 million in free cash flow or greater than 115% of net income in 2015.
Further, Pentair reiterated its fourth-quarter 2014 adjusted EPS in the range of $1.02 to $1.04, the mid-point of which reflects a 20% increase from the prior-year quarter. For full year 2014 Pentair reaffirmed adjusted EPS guidance range of $3.72–$3.74. The guidance represents an increase of around 22% over 2013 adjusted EPS of $3.05.
Pentair’s third-quarter 2014 adjusted earnings increased 22% year over year to $1.00 per share. Earnings came above the upper end of the company’s guidance range of 93 cents to 95 cents. Net sales also increased 3% year over year to $1.76 billion.
Pentair will benefit from improvement in the North American residential market as well as global food and beverage market, stabilization across Europe, cost synergies from last year’s merger with Tyco Flow and consistent share repurchases.
The board of Pentair recently raised its annual dividend for 2015 by 16% to $1.28 per share from $1.10 in 2014. In addition to dividend hike, Pentair’s board has sanctioned the repurchase of shares worth up to $1 billion, effective immediately. Further share repurchases will continue to boost earnings.
Through 2013 and the first three quarters of 2014, Pentair witnessed material and other cost inflation. The company anticipates that the current economic environment will cause volatility in the price of several raw materials to continue. Even though commodity prices have begun to moderate, the timing and impact of these market changes are uncertain.
Pentair delivers industry-leading products, services and solutions to meet diverse needs of customers related to water and other fluids, thermal management and equipment protection.
Pentair currently carries a Zacks Rank #3 (Hold).
Better-ranked stocks worth a look in the industrial products sector include Zebra Technologies Corp. (ZBRA), John Bean Technologies Corporation (JBT) and ARC Document Solutions, Inc. (ARC). While Zebra Technologies holds a Zacks Rank #1 (Strong Buy), John Bean Technologies and ARC Document Solutions carry a Zacks Rank #2 (Buy).
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