Pentair's (PNR) 2Q- What's All the Excitement About?
Guidance looks like a cut to us, and we still see weak growth ahead
Our 5/1 Red Flag Note on Pentair (PNR) cautioned readers that we saw indications in the company’s balance sheet accounts that sales were pulled forward into the first quarter and future revenue growth could be disappointing. PNR’s 2Q24 non-GAAP EPS of $1.22 beat forecasts by 8 cents and topped 2Q23’s results of $1.03. The company also beat revenue estimates by $6.3 million – which is the smallest beat in a long time (going back to 4Q19). The market loved the results and guidance and bid the stock price up by more than 10%. We don’t get the excitement - particularly in the area of guidance. The company cut its revenue growth forecast for the year from 2%-3% to -1% to 0% for the year. 3Q revenue is expected to see revenue decline by 3% to 2%. So far, our concerns about revenue growth seem validated.
On the EPS front, the company “raised” its guidance for the full year to $4.25 from the previous range of $4.15-$4.25. It simply targeted the high end of the previous range. However, the company beat by 4 cents in 1Q and 8 cents in 2Q. Just adding the 12 cents of 1H earnings beats to the original low-end of guidance is $4.27. Stepping back and looking at the big picture, merely affirming the high end of the existing guidance looks like a cut to us.
What’s more, we saw no improvement in the trends of the balance sheet accounts.
For a closer look, let’s get behind the numbers…