Pool Corp. (POOL) reported first-quarter 2011 loss of one penny per share, which bettered the Zacks Consensus Estimate of loss of eight cents per share. The results also compare favorably with a loss of 12 cents in the comparable quarter prior year. The improvement was driven by robust top-line growth along with efficient cost management and easier comparison.
The company reported a 16% year-over-year increase in net sales to reach $312.9 million during the quarter, handily beating the Zacks Consensus Estimate of $287.0 million.
Inside The Headline Numbers
Overall Base business sales of Pool improved 15% year over year, aided by 15% growth in the swimming pool side and 12% growth on the irrigation front. Weather remains the most significant external factor benefiting the business. Favorable weather conditions throughout most southern markets along with market share gain and improved economic conditions compared to the first quarter of 2010, contributed to the quarter’s growth.
Notably, the green business scored positive results for the first time since the economic downturn. Within the largest markets of the blue business, Texas was the most prominent with 27% growth. Other markets, primarily in the southeast and Florida also grew 17% and 14%, respectively. However, in California, unfavorable weather conditions suppressed the quarter’s growth to only 4.4%.
Gross profit climbed 20% year over year to $91.4 million and gross margin spiked 90 basis points (bps) to 29.2% attributable to Pool’s pricing discipline coupled with improvements in sales trends and purchase execution. Operating income increased to $576 million from the year-ago loss of $7.9 million.
Financials
Turning to the balance sheet, cash and cash equivalents slipped 1% year over year to $11.4 million. Net receivables grew 10% from the prior-year period to $173.8 million attributable to higher sales in March 2011. The inventory level upped 15% year over year to $438.8 million at the end of the first quarter reflecting stock piling related to recent acquisitions and higher purchase levels in anticipation of increased seasonal demand for second quarter of 2011. Total debt outstanding was $180.2 million versus $242.2 million in the year-ago quarter.
Outlook
For full-year 2011, management raised its earnings per share expectation in the range of $1.35–$1.45 from $1.27–$1.35 on the back of strong first quarter results. Pool anticipates modest sales growth for the remainder of 2011.
Our Take
The first-quarter results depict sustained growth in the company’s business, aided by a slow resurgence in global economy. Management realizes the opportunity to grow earnings per share over a 20% rate per year for the next five years. We are also supportive of management’s view and believe that the worst is over, even in the green business.
However, the macro economy is yet to show definitive signs of recovery, which might restrict replacement, renovation and new construction in the near term. Pool, which competes with Johnson Outdoors Inc. (JOUT), currently retains a Zacks #3 Rank (short-term Hold rating). We are also maintaining our long-term Neutral recommendation on the stock.
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