Zacks
0
All posts from Zacks
Zacks in Our Research. Your Success.,

Pool Corp (POOL) Q1 Earnings Beat Estimates on Mild Winter

Pool Corp. POOL, the world’s largest wholesale distributor of swimming pool and related backyard products, reported solid first-quarter 2016 results on the back of a relatively warmer weather throughout the quarter. Despite raising its earnings outlook for 2016, shares of the company slipped around 4% over the past two days reflecting investor caution on expectations of sluggish sales in the second quarter.

First-quarter earnings of 38 cents per share surpassed the Zacks Consensus Estimate of 25 cents by a wide 52%. Earnings surged 100% from the prior-year quarter figure of 19 cents. The improvement was driven by growth in sales and gross profits, which was partially offset by unfavorable foreign currency fluctuations.

 

Net sales of $515.3 million in the quarter surpassed the Zacks Consensus Estimate of $482 million by 6.8% and surged 14% year over year. The upside was mainly driven by 13% growth in base business sales.

As the warmer-than-usual weather continued into the beginning of 2016 across many of the company’s markets, customers indulged in pool product purchases much earlier, thereby driving revenues.

Behind the Headline Numbers

Despite a 14.3% year-over-year upside in cost of sales, gross profits surged 14.6% to $143 million backed by sales growth. The improvement was driven mainly by base business gross profit, which improved 14%. Gross margin improved 10 basis points to 27.8%.

Selling and administrative expenses (operating expenses) were up 3.9% to $113.5 million in the first quarter. The rise was mainly due to a 3% increase in base business operating expenses as a result of labor-related costs, and marketing and volume-driven freight expenses.

Operating income was $29.5 million, up 89.3%. Operating margin increased 220 basis points year over year to 5.7%.

Outlook

The company increased its outlook for 2016 earnings per diluted share to the $3.25–$3.40 band, from the prior guidance of $3.20–$3.35. The company’s robust first-quarter 2016 sales paved the way for the improved outlook.

However, management expects sales in the second quarter to be sluggish as increased sales in the first quarter will hurt purchases in the upcoming quarter.

Pool Corp currently has a Zacks Rank #2 (Buy).

Other well-ranked stocks in the same space include Marine Products Corp. MPX, Smith & Wesson Holding Corporation SWHC and Sturm, Ruger & Co. Inc. RGR. All the three companies sport a Zacks Rank #1 (Strong Buy).

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
POOL CORP (POOL): Free Stock Analysis Report
 
STURM RUGER&CO (RGR): Free Stock Analysis Report
 
SMITH & WESSON (SWHC): Free Stock Analysis Report
 
MARINE PRODUCTS (MPX): Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research