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Pentair (PNR) to Report Q3 Earnings: What's in the Cards?

Pentair plc PNR is scheduled to report third-quarter 2021 results on Oct 26, before the opening bell.

Q2 Results & Surprise History

Pentair’s revenues and earnings improved in second-quarter 2021, primarily driven by strong demand in the residential focused businesses. The company also beat the Zacks Consensus Estimate on both counts.

The company has an impressive earnings surprise history. Pentair beat earnings estimates in each of the trailing four quarters, the average surprise being 20.9%.

Pentair plc Price and EPS Surprise

Pentair plc price-eps-surprise | Pentair plc Quote

Q3 Estimates

The Zacks Consensus Estimate for third-quarter revenues is pegged at $952 million, indicating year-over-year growth of 19.3%. The same for earnings stands at 84 cents, suggesting year-over-year improvement of 20%. The Zacks Consensus Estimate for the quarter’s earnings has remained unchanged over the past 30 days.

What the Zacks Model Unveils

The proven Zacks model does not conclusively predict an earnings beat for Pentair this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of beating estimates. This is not the case here as you will see. You can see the complete list of today’s Zacks #1 Rank stocks here.

Earnings ESP: The Earnings ESP for Pentair is -2.51%. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.

Zacks Rank: Pentair currently carries a Zacks Rank of 3.

Key Factors to Note

Pentair continues to witness solid improvement in its residential facing businesses. The company’s pool business has been benefiting from increased demand for swimming pools as consumers were forced to stay at home amid the pandemic, which triggered the desire to invest in their backyards. Demand for new pools remains robust even this year as consumers are continuing to enhance their at-home quality of life by investing in pools. Apart from pool construction, demand for pool maintenance remains strong. Considering that nearly 80% of the Consumer Solutions segment serves residential markets, the robust demand is likely to get reflected in the third-quarter results. The company’s efforts to expand in the areas of pool and residential and commercial water treatment through acquisitions, introduction of water-treatment solutions, investments and innovations are anticipated to have contributed to the Consumer Solutions segment’s performance in the quarter to be reported.

However, 20% of the Consumer Solutions segment’s revenues are tied to commercial business, which has exposure to restaurants and hospitality. Muted demand due to temporary shutdowns across hospitality and restaurant industries might have weighed on the segment’s third-quarter performance.

The Zacks Consensus Estimate for the Consumer Solutions segment’s revenues is currently pegged at $583 million, suggesting growth of 24% year over year. The consensus mark for the segment’s operating profit for the quarter stands at $140 million, indicating an improvement of 23% year over year.

Activity in commercial and industrial businesses has picked up lately and likely to have driven the Industrial & Flow Technologies segment’s third-quarter performance. The Zacks Consensus Estimate for the Industrial & Flow Technologies segment’s revenues stands at $362 million, indicating an improvement of 11% from the prior-year quarter. The consensus mark for the segment’s operating profit stands at $48.8 million, suggesting growth of 14% from $43 million reported a year ago.

Pentair has been witnessing inflationary increases due to high demand and tight supply of raw materials such as metals, resins and electronics, along with increased logistics costs. While it has been undertaking pricing actions and focusing on productivity improvements that could help offset these increases, supply chain pressures and inflationary increases are anticipated to have weighed on third-quarter performance.

Price Performance

Image Source: Zacks Investment Research

Shares of the company have gained 43.9% over the past year compared with the industry’s rally of 67.6%.

Stocks Poised to Beat Earnings Estimates

Here are some Industrial Products stocks, which you may consider as our model shows that these have the right combination of elements to post an earnings beat in their upcoming releases:

Reliance Steel & Aluminum Co. RS has an Earnings ESP of +3.54% and a Zacks Rank of 1, at present.

Columbus McKinnon Corporation CMCO has an Earnings ESP of +5.26% and a Zacks Rank #2, currently.

AGCO Corporation AGCO, currently a Zacks #3 Ranked stock, has an Earnings ESP of +0.77%.

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