On Thursday, Pool (NASDAQ:POOL) Corporation (NASDAQ:POOL) shares maintained Hold rating with a steady price target of $335.00, according to a Stifel analyst. Despite third-quarter earnings per share (EPS) of $3.26, which exceeded the consensus estimate of $3.16, the analyst expressed concerns over the company's performance.
The results, which showed a year-over-year decline of 7%, were bolstered by stronger sales, including a 2% increase from an extra selling day, outperforming the analyst's conservative forecast based on the company's revised guidance.
Net revenue for Pool Corp fell by 3%, as weaker discretionary spending was not fully offset by maintenance revenue. The analyst noted that there was no mention of hurricane disruptions in the report.
Furthermore, the analyst found the flat gross margin performance disappointing compared to the previous year, which had been impacted by high competitive activity. The trailing twelve-month (TTM) gross margin, excluding an import tax from the first quarter, was below the company's long-term guidance of 30%.
The firm reiterated its full-year 2024 underlying EPS guidance, ranging from $10.85 to $11.25, excluding a $0.21 benefit from an accounting standards update (ASU). Stifel continues to estimate a full-year 2024 EPS of $11.03, excluding the ASU benefit.
Despite the hold rating, the firm acknowledged Pool Corp's leading position in the U.S. pool wholesale distribution market, with a 37% market share and substantial resources to enhance its dominance.
The analyst suggested that while the company's valuation reflects a premium compared to other specialty distributors, with a forward enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA) multiple of 19 times for FY26, this leaves little margin for error.
The current valuation does not fully account for a potentially slower recovery and higher costs associated with capturing market growth. The analyst expects the stock to remain range-bound, influenced by interest rate sentiment, and believes that demonstrating stability in FY24 will be crucial for sustained investor interest.
Pool Corp will hold its conference call at 11 AM EDT, and participants can join by dialing 1-888-348-8936.
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