On February 17, Pool Corp. (POOL) reported fourth quarter fiscal 2010 loss of 24 cents per share, which was in line with the Zacks Consensus Estimate. However, the quarter’s loss compared favorably with the year-earlier loss of 28 cents. The loss narrowed due to modest top-line growth along with efficient cost management. For fiscal 2010, earnings were $1.15 versus 39 cents recorded in 2009.
Given below is our report on the recent earnings announcement as well as subsequent analyst estimate revisions over short and long-term periods.
Earnings Report Flashback
The company reported a 4.5% year-over-year increase in net sales to reach $241.4 million during the quarter, inching past the Zacks Consensus Estimate of $240.0 million. For fiscal 2010, net sales increased 5% to $1.61 billion.
(Read our full coverage on this earnings report: Pool Reports In Line)
Earnings Estimate Revisions — Overview
Following the release of Pool Corp.’s fourth quarter results, estimate revision trends among the analysts depict a mixed outlook. Let’s dig into the earnings estimate details.
Agreement of Estimate Revisions
Over the last 7 days, a positive trend has been noticed for the first quarter of 2011, with earnings estimates having been increased by 4 out of 9 analysts. On the other hand, none moved downward.
The analysts expect gross margin to expand modestly with the greatest chunk coming from the first quarter of 2011 due to easy comparison, partially offset by the drastic drop in temperature in the early months of 2011.
The positive note was maintained for fiscal 2011 with three out of nine analysts going in for earnings increment and two cutting the same. The analysts remained impressed with Pool’s ability to gain market share. In fact, management expects its struggling Green business to turn around during 2011.
However, analysts’ outlook remained muted on the second quarter of 2011 with one out of nine analysts increasing the estimate and three reducing the same.
Magnitude of Estimate Revisions
The magnitude of estimate revisions for Pool has been moderate over the last 7 days. Following the release of fourth quarter results, estimate for the first quarter 2011 was raised by one penny. The estimate for the second quarter 2011 was cut by a penny while the estimate for fiscal 2011 has remained the same.
Currently, the Zacks Consensus Estimate for the first quarter is 8 cents loss per share and for the second quarter is $1.12 per share. For 2011, the Zacks Consensus Estimate is earnings of $1.32 per share.
Our Recommendation
Pool is an acknowledged leader in the industry. The potential for market growth is also significant. The company remains committed to returning value to shareholders through share buy back and dividend payment.
However, we believe, Pool is not yet totally immune to challenges. Macroeconomic factors like depressed valuation of real estate will likely restrict replacement, renovation and new construction business which continue to challenge sales growth in the near term.
Pool currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. We are also maintaining our long-term Neutral recommendation on the stock. The peer group of the company includes Arctic Cat Inc. (ACAT) and Sturm, Ruger & Co. Inc. (RGR).
About Earnings Estimate Scorecard
Len Zacks, PhD in mathematics from MIT, proved over 30 years ago that earnings estimate revisions are the most powerful force impacting stock prices. He turned this ground breaking discovery into two of the most celebrating stock rating systems in use today. The Zacks Rank for stock trading in a 1 to 3 month time horizon and the Zacks Recommendation for long-term investing (6+ months). These “Earnings Estimate Scorecard articles help analyze the important aspects of estimate revisions for each stock after their quarterly earnings announcements. Learn more about earnings estimates and our proven stock ratings at http://www.zacks.com/education/
ARCTIC CAT INC (ACAT): Free Stock Analysis Report
POOL CORP (POOL): Free Stock Analysis Report
STURM RUGER&CO (RGR): Free Stock Analysis Report
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