Pool Corp. Upped to Neutral – Analyst Blog

We are upgrading our recommendation on the shares of Pool Corp. (POOL) to Neutral. The company reported a first quarter loss of 12 cents per share, better than the Zacks Consensus Estimate of a loss of 15 cents.

The beat was driven by a drop in expenses. However, adverse weather conditions coupled with a stressed construction market continued to impact its performance.

Pool Corp. has also reaffirmed its earnings guidance for the full year 2010. The company expects to report earnings of $1.00 to $1.15 per share. The company anticipates positive sales comps in the second quarter and the remaining 2010 with the gradual economic recovery. With the official start of the pool season in March, the company is also experiencing moderating sales declines.

Pool Corp. is an acknowledged leader in an industry where the potential for market growth is also significant. According to the company, there are approximately 70 million households in the U.S. with both space and economic capacity to own a swimming pool. Of this, approximately 13% own a pool and the rest 87% are yet to do so. This is a very large area for growth, and as the dominant wholesaler in the industry, Pool Corporation stands to capitalize on future industry growth.

Additionally, given the ongoing difficult external environment, the company continues to focus on maintaining a sound cost structure.

However, it is also notable that while reaffirming the company’s guidance at the time of its first quarter earnings release, management pointed out that margins won’t be able to post any significant improvement for the year, given the uncertainty of competitors’ pricing strategies.

Shares of Pool Corp. increased 37 cents or 1.45% to $25.89 in Monday’s regular session on Nasdaq.