On Tuesday, RBC Capital Markets adjusted its outlook on Pentair (NYSE:PNR), a company specializing in water treatment and sustainable solutions, by reducing its price target to $99 from $103. The firm has maintained an "Outperform" rating for the stock.
This revision follows a report from Pentair's main distributor, Pool (NASDAQ:POOL) Corp, which announced after the market closed on Monday that its second-quarter earnings for 2024 are expected to fall short of initial forecasts. The shortfall is attributed to a decline in the new pool build and remodel categories.
Pentair, which counts on its Pool segment for approximately 33% of its total revenue and 45% of its profits, is significantly tied to Pool Corp , with about 60% of its sales in this division coming from the distributor. However, only one-third of Pool Corp's products have a direct overlap with Pentair's offerings, indicating that the impact may not mirror Pool Corp's challenges entirely.
The negative preannouncement from Pool Corp has led to an 18% reduction in its 2024 earnings per share (EPS) outlook. In light of this development, RBC Capital has also revised downward its EPS estimate for Pentair in 2024 by 4%. The reduced earnings projection from Pool Corp has prompted a cautious approach from analysts, as Pentair's financial performance is closely linked to the pool construction and remodeling market.
Despite the lower price target, RBC Capital's rating indicates a continued positive view of Pentair's stock performance potential. The company's diverse portfolio and established market presence in water treatment and sustainable solutions provide a basis for this optimism.
Pentair's stock performance and future earnings will be closely watched by investors as the company navigates the challenges presented by the current market environment in the pool industry. The revised price target reflects the immediate impact of the distributor's earnings miss on Pentair's financial outlook for the coming year.
In other recent news, industrial company Pentair has declared a regular quarterly cash dividend of $0.23 per share, continuing its 48-year streak of dividend increases. The dividend is set to be paid in August to shareholders on record as of July 19, 2024.
Pentair also reported strong first-quarter 2024 financial results, surpassing both analysts' and consensus estimates. The company reported an adjusted earnings per share of $0.94, with an overall return on sales improvement of 80 basis points. Despite this, the company maintains a cautious outlook for 2024, reiterating its revenue growth guidance of 2-3% for the year.
Several analyst firms have recently adjusted their outlooks on Pentair. Oppenheimer raised its stock price target to $90, maintaining an Outperform rating, while Baird adjusted its financial outlook, setting a new price target of $86.00 and retaining a Neutral rating. RBC Capital Markets increased the price target to $103.00, also maintaining an Outperform rating. Lastly, TD Cowen raised its price target on the stock to $85, maintaining a Buy rating.
InvestingPro Insights
Following the recent developments and RBC Capital Markets' revised price target for Pentair, it is essential to consider additional insights. According to InvestingPro data, Pentair is trading at a forward P/E ratio of 19.43, which is relatively low given its near-term earnings growth potential. This aligns with an InvestingPro Tip highlighting that Pentair is trading at a low P/E ratio relative to near-term earnings growth, suggesting that the stock may be undervalued.
Another significant metric is the company's consistent dividend payments, with an InvestingPro Tip noting that Pentair has raised its dividend for 4 consecutive years and has maintained dividend payments for 49 consecutive years. The current dividend yield stands at 1.15%, with a dividend growth over the last twelve months of 4.55%. This track record of dividend reliability may appeal to income-focused investors, especially in uncertain market conditions.
Furthermore, Pentair's liquid assets exceed short-term obligations, and analysts have revised their earnings upwards for the upcoming period, indicating financial stability and potential for positive earnings surprises. For readers seeking more in-depth analysis and additional tips, there are 9 more InvestingPro Tips available for Pentair, which can be accessed through InvestingPro's platform using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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