On Jan 2, Zacks Investment Research upgraded Pool Corp. (POOL) to a Zacks Rank #1 (Strong Buy). Improvement in the wholesale channel and repair and remodel industry led to the upgrade.
Why the Upgrade?
The new home construction market recovered at a steady pace in the second half of 2014 after a slump at the beginning of the year. The recovery was primarily led by overall economic growth, improving job numbers, growing consumer confidence, moderating home prices, stabilizing mortgage rates and low level of housing inventory.
With the improving new home construction market, Pool Corp.’s Green business – which involves construction and installation of new pools and landscaping and represents around 8% of total sales – witnessed sales growth.
Maintenance and upkeep of pools ensure a steady revenue stream for the company even during an economic downturn. The existing pools have generated revenues throughout 2014 and the trend is expected to continue in the coming year as well.
In Oct 2014, Pool posted third-quarter 2014 results wherein earnings were in line with the Zacks Consensus Estimate while revenues missed the same. Pool’s third-quarter earnings of 78 cents per share increased 14.7% year over year driven primarily by higher year-over-year sales.
Net sales came in at $615.5 million and grew 6% year over year due to an increase in base business sales. Replacement and remodel activities continued to drive sales growth with sales increases in building materials.
Other Stocks to Consider
Other stocks in the same industry worth a look include Black Diamond, Inc. (BDE) and Polaris Industries Inc. (PII). While Black Diamond sports a Zacks Rank #1, Polaris Industries carries a Zacks Rank #2 (Buy). One may also consider Carnival Corp. (CCL) from the wider consumer discretionary sector with a Zacks Rank #2.
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