PNR - Pentair: Good Growth Prospects Conservative Margin Guidance

2024-05-06 14:57:28 ET

Summary

• Pentair's revenue growth is expected to benefit from easier comparisons and the completion of inventory destocking in the Pool segment.
• The Flow segment is experiencing strong demand driven by IIJA funding and the commercial sector, while the Water Solutions segment is seeing good demand from quick-service restaurants.
• The company's operating margins are expected to surpass management's target of 22% with the help of productivity savings and operating leverage, potentially leading to a positive stock catalyst.

Investment Thesis

Pentair plc's ( PNR ) revenue growth should benefit from easier comparisons and the completion of channel inventory destocking in the Pool segment in the coming quarters. Further, strength in the Flow segment driven by IIJA funding and strong end-market demand should also contribute to revenue growth. While the Water Solutions segment faces headwinds from difficult comps in Q2 2024, the segment's sales should turn positive in the second half of 2024 with the help of good commercial end market demand, synergy benefits from Manitowoc integration, and easier comps in the 2H 2024. Apart from organic growth, the company has a healthy balance sheet which should enable it to pursue inorganic growth opportunities....

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