Pentair plc PNR reported fourth-quarter 2023 adjusted earnings per share (EPS) of 87 cents, beating the Zacks Consensus Estimate of 86 cents per share. The bottom line came in line with the upper end of the company’s guidance of 82-87 cents and improved 6% from the year-ago quarter.
Including one-time items, EPS was $1.25 compared with the prior-year quarter’s EPS of 58 cents.
Net sales declined 1.8% year over year to $985 million in the quarter under review. However, the top line outpaced the Zacks Consensus Estimate of $973 million. Excluding the impacts of acquisitions, divestitures and currency translation, core sales declined 2% in the quarter.
The cost of sales declined 8.8% year over year to $619 million. The gross profit in the reported quarter amounted to $366 million, up 12.7% from the prior-year quarter. The gross margin was 37.2% compared with the year-ago quarter’s 32.4%.
SG&A expenses totaled $176 million, which declined 7.6% from the prior-year quarter’s $190 million. Research and development expenses were up 1.7% year over year to $23.5 million.
The operating income in the quarter was $167 million, up 49.6% year over year. The adjusted segmental operating income increased 8% year over year to $198 million. The adjusted segment margin was 20.1% in the reported quarter compared with the year-ago quarter’s 18.2%.
Segment Performances
Net sales in the Flow segment totaled $378.5 million, up 0.7% from the prior-year quarter. Core sales dipped 1% in the quarter under review. Our estimate for the segment’s net sales was $377.6 million for the quarter.
Operating earnings for the segment dipped 0.5% year over year to $65 million. Our estimate for the segment’s operating profit was $66.4 million.
Net sales in the Water Solutions segment declined 4.9% year over year to $269.6 million. Core sales were down 4% year over year in the quarter. Our estimate for the segment’s net sales was $274 million for the quarter. The segment’s earnings were $52 million compared with $45 million reported in the year-ago quarter. The figure was lower than our estimate of $65.8 million.
Net sales in the Pool segment totaled $336 million in the quarter, down 2% from the year-ago quarter. Core sales were also down 2% from the prior-year quarter. Our estimate for the segment’s net sales was $320.6 million.
Operating earnings for the Pool segment rose 5% year over year to $105 million. Our estimate for the segment’s operating income was $87.2 million.
Cash Flow & Balance Sheet Updates
Pentair had cash and cash equivalents of around $170 million at the end of 2023 compared with $109 million at 2022 end. Net cash generated from operating activities was $621 million in 2023 compared with $364 million in 2022. The company had a long-term debt of $1.99 billion as of Dec 31, 2023, down from $2.32 million as of Dec 31, 2022.
On Dec 11, 2023, Pentair announced that it had raised its quarterly dividend payout by 5% to 23 cents per share. The dividend will be paid on Feb 2, 2024, to shareholders of record at the close of the business on Jan 19, 2024. This marks the 48th consecutive year of dividend increase.
2023 Performance
Pentair reported adjusted EPS of $3.75 for 2023, beating the Zacks Consensus Estimate of $3.74 per share. Earnings were up 2% compared with the 2022 figure of earnings of $3.68 per share. Pentair had earlier provided an EPS guidance in the range of $3.70 to $3.75 for 2023. Including one-time items, EPS was $3.75 compared with the $2.92 in 2022.
Net sales dipped 0.4% year over year to $4.1 billion but beat the Zacks Consensus Estimate of $4.09 billion. Excluding the impacts of acquisitions, divestitures and currency translation, core sales declined 5%.
Guidance for 2024
Pentair expects adjusted EPS of $4.15-$4.25 for 2024. Sales growth for the year is expected to be between 2% and 3% on a reported basis.
For the first quarter of 2024, the company expects adjusted EPS of 88-91 cents. Pentair anticipates current-quarter sales to be down 2-3% from the prior-year quarter’s reported figure.
Price Performance
Pentair stock has gained 44.5% over the past year compared with the industry’s 1.6% growth.
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Zacks Rank and Stocks to Consider
Pentair currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks from the Industrial Products sector are Cintas Corporation CTAS, Eaton Corporation ETN and A. O. Smith Corporation AOS, carrying a Zacks Rank #2 (Buy) each. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Cintas’ fiscal 2024 EPS is pegged at $14.57. The estimate indicates year-over-year growth of 12.2%. The consensus estimate for 2024 earnings has gone up 2% in the past 60 days. The company has a trailing four-quarter average earnings surprise of 3.5%. CTAS shares have rallied 38% over the past year.
Eaton has an average trailing four-quarter earnings surprise of 4.2%. The Zacks Consensus Estimate for ETN’s fiscal 2024 earnings is pegged at $10.00 per share, which indicates year-over-year growth of 10.8%. The estimate has moved up 0.3% in the past 60 days. The company’s shares have gained 55% in a year.
The Zacks Consensus Estimate for A. O. Smith’s 2024 earnings is pegged at $4.03 per share, suggesting year-over-year growth of 6.3%. The consensus estimate for 2024 earnings has moved 1% north in the past 60 days and suggests year-over-year growth of 6.3%. The company has a trailing four-quarter average earnings surprise of 14%. AOS shares have gained 37% in a year.
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