2024-07-25 12:52:10 ET
Summary
- Pentair delivered better than expected Q2 results, as strength in the Pool segment offset softer results elsewhere and drove a 5% operating income beat.
- Pentair's shares have outperformed many competitors in the pool equipment and flow control and filtration industries, with resilient demand in Pool and strong margin self-improvement execution.
- The Pool segment's skew to repair/replace and automation offsets some of the risk from weaker housing activity and consumer spending, but weaker commercial and industrial activity is a headwind.
- Pentair shares look fairly valued based upon likely near-term results, but there's an argument to make that the shares can support a higher multiple on the basis of further margin improvement.
Sales growth certainly matters for industrial companies, but over time there has been a closer correlation between margins (and margin-driven metrics like ROIC) and multiples than growth and multiples for industrials. That’s a meaningful positive for Pentair ( PNR ), as this leading player in water-related systems continues to excel on the margin side....
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Pentair's Execution Outpacing More Challenging End-Market Demand