Pentair plc (PNR)- Stealth Cuts
3Q24 featured more stealth cuts and one-time accounting benefits
PNR’s 3Q24 adjusted EPS of $1.09 beat the consensus estimate by 2 cents. Revenue fell by 1.5% but beat guidance by $5 million- just 0.5%. PNR’s guidance for 4Q called for sales to be down 1-2%, but it raised the year-end EPS guidance by the 2 cents it beat in 3Q to $4.27.
It looks odd to us that PNR came into 2024 forecasting adjusted EPS of $4.15-$4.25, or $4.20 at the midpoint. It has now reported 14 cents in beats in the last three quarters yet the forecast for 2024 is now only $4.27. Just adding the beats to the low end of the original forecast should have them at $4.29, and adding them to the midpoint would put them at $4.34. We consider this a “stealth cut” as despite topping earnings estimates in the first three quarters, the company’s expectation for the full year has effectively declined which seems to indicate its outlook for growth is contracting. Nevertheless, the stock is over 30% above the price at the time of the original guidance.
In addition to the questionable guidance, we noticed several short-lived, accounting-related benefits that more than accounted for the headline earnings beat in the third quarter. Let’s take a look behind the numbers…
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