Pentair (PNR) Q4 Earnings Meet Estimates, Provides ’18 View

Pentair plc PNR reported fourth-quarter 2017 adjusted earnings of 93 cents per share, up 19% from the year-ago quarter. Earnings came in line with the Zacks Consensus Estimate as well as management’s guidance.

Including one-time items, the company reported earnings of $1.11 per share, soared 85% from 60 cents recorded in the year-ago quarter.

Net sales went up 6.1% year over year to $1.26 billion. The figure came ahead of the Zacks Consensus Estimate of $1.24 billion. Excluding the impact of currency translation and acquisitions, core sales improved 3%.

Cost of sales climbed 6% to $793 million in the quarter from $748 million recorded in the year-ago quarter. Gross profit in the reported quarter was $468 million, up 6% from $440 million recorded in the prior-year quarter. Gross margin expanded 10 basis points (bps) year over year to 37.1% in the quarter.

Selling, general and administrative expenses flared up 20% year over year to $302 million. Research and development expenses increased 6% year over year at $28.7 million. Adjusted segment operating income increased 11% to $227 million from $204 million recorded in the year-ago quarter. Operating margin advanced 80 bps to 18.0%.

Sales from the Water Quality Systems segment rose 5.6% year over year to $721 million. Operating earnings increased 15% to $139 million.

The Electrical segment reported revenues of $542 million, up 6.7% from the year-earlier quarter. Segment operating earnings were up 6% year over year to $109 million.

Pentair had cash and cash equivalents of $113 million at the end of fiscal 2017 end compared with $238.5 million recorded at the end of 2016. The company recorded cash from operations of $674 million in fiscal 2017, compared with $702 million recorded in the last year. It reported free cash flow of $551 million for fiscal 2017, compared with $770 million in the prior year.

Pentair previously announced that its board of directors had unanimously approved a plan to separate into it two publicly-traded companies. The separation is expected to occur through a tax-free spin-off of Electrical segment by Pentair to its shareholders with a target date of Apr 30, 2018.

On Dec 5, 2017, Pentair announced that its Board of Directors approved a 1% hike in the company's annual cash dividend for 2018 to $1.40. 2018 will mark the 42nd consecutive year that Pentair has increased dividend.

Pentair reported adjusted earnings per share of $3.53 in fiscal 2017, up 19% year over year. Earnings were on par with the Zacks Consensus Estimate as well as management guidance. Including one-time items, earnings was $2.61 compared with $2.47 in the prior fiscal.

Revenues edged up 1% year over year to $4.94 billion in fiscal 2017, which beat the Zacks Consensus Estimate of $4.91 billion. The company had guided revenues of $4.9 billion.

Pentair initiated full-year 2018 adjusted EPS guidance of $4.00, reflecting a 13% year-over-year growth over fiscal 2017 earnings. Revenue guidance is at $5.1 billion, which reflects an increase of 3-5% on a reported basis and a rise of 2-4% on a core basis. Compared with revenues of $4.94 billion reported in fiscal 2017, the guidance projects a year-over-year rise of 9%.

It also guided first-quarter 2018 adjusted EPS range of 81-83 cents. Revenues are projected at around $1.26 billion, up approximately 6% on a reported basis and 3% on a core basis compared with first-quarter 2017.

Pentair has underperformed the industry with respect to price performance over the past year. The stock has gained 26%, while the industry recorded growth of 33%.

Pentair currently carries a Zacks Rank #3 (Hold).

Better-ranked stocks in the same space include Caterpillar Inc. CAT, H&E Equipment Services, Inc. HEES and Komatsu Ltd. KMTUY. All three stocks flaunt a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Caterpillar has an expected long-term earnings growth rate of 10.3%. Its shares have appreciated 70% in a year’s time.

H&E Equipment Services has an expected long-term earnings growth rate of 18.6%. The company’s shares have gained 56% over the past year.

Komatsu has an expected long-term earnings growth rate of 16.2%. Its shares have surged 60% over the past year.

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