Tuesday, Wolfe Research initiated coverage on Pentair (NYSE:PNR) with an Outperform rating and a price target of $125.00. The firm's analysis suggests that Pentair's target for a mid-single-digit revenue compound annual growth rate (CAGR) through 2026 is attainable, particularly at the lower end of its 4-5% range. This growth expectation is buoyed by a forecasted rebound in the underperforming Pool (NASDAQ:POOL) market.
Pentair's growth model projects approximately 3% and 5% organic growth for 2025 and 2026, respectively, with the Pool segment anticipated to grow by 6.8% and 6.5% in those years. These figures place Pentair's performance on par with the median of Wolfe Research's coverage universe. The consensus among analysts is a 4% growth rate for the next two years, positioning Wolfe Research's 2026 revenue estimate marginally below the consensus by 70 basis points.
The firm's confidence in Pentair's growth prospects is further reinforced by historical data showing the company's organic growth has been consistent with the broader market. Specifically, Pentair's growth has closely mirrored trends in U.S. Manufacturing Industrial Production and Residential Fixed Asset Investment. Based on these correlations, Wolfe Research anticipates a normalized organic growth pattern for Pentair, consisting of 3% volume and 1% price increases, with the potential for an additional approximate 100 basis points of upside from strategic pricing initiatives.
Wolfe Research's positive outlook for Pentair is reflected in the Outperform rating and the ambitious price target, suggesting a favorable performance for the company's stock in the coming years. This outlook is based on the anticipated recovery in the Pool market and Pentair's strategic growth initiatives.
In other recent news, water treatment company Pentair has demonstrated robust performance in its recent earnings reports, despite a 2% dip in sales to $993 million. The company's adjusted operating income rose by 13% to $239 million, and adjusted earnings per share increased by 16% to $1.09. Pentair's pool sales also grew by 7% to $331 million, contributing to a 24% income increase. The company expects full-year 2024 sales to range from $4.75 billion to $4.85 billion, and Q4 2024 sales between $965 million and $975 million, with an adjusted EPS guidance of $1.02.
Several analyst firms, including KeyBanc Capital Markets, TD Cowen, and RBC Capital, have raised their price targets for Pentair, reflecting confidence in the company's ongoing transformation initiatives and operational efficiency. KeyBanc maintained an Overweight rating on the stock and increased the price target to $115 from $110, while TD Cowen raised the price target to $110 from $95, retaining a Buy rating. RBC Capital adjusted its stock price target from $101.00 to $115.00, maintaining an Outperform rating.
InvestingPro Insights
Pentair's (NYSE:PNR) strong market position and growth prospects, as highlighted by Wolfe Research, are further supported by recent data from InvestingPro. The company's stock has shown impressive performance, with a 72.7% total return over the past year and a 50.16% return year-to-date. This aligns with Wolfe Research's optimistic outlook and Outperform rating.
InvestingPro Tips reveal that Pentair has raised its dividend for 5 consecutive years and has maintained dividend payments for an impressive 49 consecutive years, demonstrating a commitment to shareholder returns. This consistent dividend policy could be attractive to investors seeking stable income alongside potential capital appreciation.
The company's financial health appears robust, with liquid assets exceeding short-term obligations and operations maintained with a moderate level of debt. These factors contribute to Pentair's ability to invest in growth initiatives and navigate market fluctuations, supporting Wolfe Research's growth projections.
It's worth noting that InvestingPro offers 16 additional tips for Pentair, providing investors with a comprehensive analysis of the company's financial position and market performance. These insights can be valuable for those looking to make informed investment decisions based on a broader range of metrics and expert observations.
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