Pentair Shows Improved Profitability Despite Sales Decline, Charts Upward Growth Path For 2024

Zinger Key Points
  • Pentair's Fiscal 2023 ends with strong cash flow; eyes growth in 2024 with focus on water sustainability and margin expansion.
  • Pentair Q4: Sales down 1.8% to $984.6M, but gross margin up to 37.2%, operating income increases 49.6%.

Pentair PLC PNR reported a fourth-quarter fiscal 2023 net sales decline of 1.8% year-over-year to $984.6 million and a core sales decline of 2% Y/Y, beating the consensus of $976.02 million.

The gross margin expanded to 37.2% from 32.4%. Operating income rose 49.6% Y/Y to $167 million, and the operating margin expanded to 17% from 11.1% a year ago.

Adjusted EPS was $0.87, up from $0.82 YoY, beating the consensus of $0.86.

Flow (previously named Industrial & Flow Technologies) sales increased by 1% Y/Y to $378.5 million, Segment income of $65 million (flat Y/Y), and ROS was 17.2%, a decrease of 20 bps Y/Y.

Water Solutions sales were $269.6 million (-5% Y/Y), Segment income was $52 million (+15% Y/Y), and ROS was 19.1.0%, up 320 bps Y/Y.

Pool segment sales were $336.2 million (-2% Y/Y), Segment income was $105.1 million (+5% Y/Y), and ROS was 31.3%, up 220 bps Y/Y.

For fiscal 2023, net cash provided by operating activities of continuing operations was $621 million, and free cash flow from continuing operations was $550 million.

Dividend: As previously announced on Dec. 11, 2023, Pentair will pay a regular quarterly cash dividend of $0.23 per share on February 2, 2024, to shareholders of record at the close of business on January 19, 2024. This dividend reflects a 5% increase from the prior regular cash dividend of $0.22.

"As we look to 2024, we are committed to driving growth, profitability and returns by focusing on our mission to help the world sustainably move, improve, and enjoy water, life's most essential resource,” commented Pentair CEO John L. Stauch.

“We are investing in key areas to drive long-term growth and optimizing our sourcing and operational footprint which we expect to continue to drive further margin expansion in 2024 as these Transformation initiatives scale," he added.

First quarter 2024 Outlook: Pentair sees GAAP EPS of $0.81-$0.84 and an adjusted EPS of $0.88-$0.91 versus consensus Of $0.95. It expects Sales to be down ~2%-3% YoY.

2024 Outlook: Pentair expects FY24 GAAP EPS of $3.82-$3.92 and adjusted EPS of $4.15-$4.25 vs. consensus of $4.21; sees sales increase of 2%-3% on a reported basis.

Price Action: PNR shares are trading higher by 0.52% at $73.64 on the last check Tuesday.

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