Pool Corp. (POOL) reported fourth-quarter 2010 loss of 24 cents per share, in line the Zacks Consensus Estimate. Pool had incurred a loss of 28 cents in the comparable quarter prior year.
The increase was driven by a modest top-line growth along with efficient cost management. For fiscal 2010, earnings were $1.15 versus 39 cents recorded in 2009.
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.
Inside The Headline Numbers
Blue Base business sales of Pool grew 5% primarily aided by market share gains and increased consumer spending. Weather remains the most significant external factor affecting the maintenance and repair segments of this business, which represents approximately 70% of domestic Blue business sales.
Sales from Pool’s first and fourth largest markets California and Arizona were down a respective 2.3% and 5.9% year over year due to unfavorable weather. However, business at Florida and Texas, the second and third largest markets, were up 3.2% and 3.7%, respectively, thanks to favorable weather conditions.
Gross profit climbed 9.7% year over year to $73.6 million and gross margin spiked 150 basis points (bps) to 30.5% due to Pool’s pricing discipline coupled with improvement in sales trends and purchase execution. Operating expenses increased 1.8% from the year-ago period to $90.4 million, operating loss narrowed 22.9% to $16.8 million.
Financials
Turning to the balance sheet, cash and cash equivalents decreased 39% year over year to $9.7 million. Net receivables grew 5% from the prior-year period to $101.5 million attributable to an increase in current trade receivables as a result of base business sales growth, higher vendor rebate receivables and the impact from the reduction in the allowance for doubtful accounts.
The inventory level fell 2% year over year to $347.4 million at the end of the fourth quarter. Total debt outstanding was $198.7 million versus $200.7 million in the year-ago quarter.
Outlook
For full-year 2011, management expects earnings per share in the range of $1.27–$1.35.
The fourth-quarter results signaled a revival in the company’s business, which came on the back of resurgence in global economy. Management believes that the worst is over, even in the Green business.
However, macroeconomic factors are yet to show definitive signs of recovery and could restrict replacement, renovation and new construction in the near term. Pool currently retains a Zacks #3 Rank (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).
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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