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Pool Corp (POOL) Q1 Earnings Miss Estimates, Decline Y/Y

Pool Corporation POOL reported first-quarter 2023 results, with earnings and revenues missing the Zacks Consensus Estimate. Also, the top and the bottom line declined from the prior-year quarter's figure. During the quarter, the company’s operations were affected by lower pool construction activity, economic pressures (related to interest rates) and weather-related constraints. Following the announcement, shares of the company dropped 2% during trading hours on Apr 20.

Earnings & Revenues Discussion

During the first quarter of 2023, the company reported adjusted earnings per share (EPS) of $2.46, missing the Zacks Consensus Estimate of $3.26. In the prior-year quarter, the company reported an adjusted EPS of $4.23.

Quarterly net revenues of $1,206.8 million missed the consensus mark of $1,291 million. The top line declined 14.6% year over year. The downside was caused by a dismal performance in the Base business and Excluded segments.

Pool Corporation Price, Consensus and EPS Surprise

Pool Corporation Price, Consensus and EPS Surprise
Pool Corporation Price, Consensus and EPS Surprise

Pool Corporation price-consensus-eps-surprise-chart | Pool Corporation Quote

Segmental Performance

Pool reports operations under two segments — The Base Business (constituting most of the business) and the Excluded (sale centers excluded from the Base business).

During the first quarter, revenues in the Base Business segment were down 15.5% year over year to $1,130.4 million. The segment’s operating income declined 38.9% year over year to $134.7 million. The operating margin contracted 460 basis points (bps) from the year-ago quarter’s level to 11.9%.

The Excluded segment reported net revenues of $76.4 million in the first quarter compared with $75 million reported in the prior-year quarter. During the quarter under review, the segment reported an operating income of $11.1 million compared with $15.5 million reported in the prior-year quarter. The segment’s operating margin came in at 14.5% compared with 20.6% reported in the prior-year quarter.

Operating Highlights & Expenses

During the first quarter, the cost of sales came in at $837 million, down 13.3% from the prior-year quarter’s level. During the quarter, gross profits (as a percentage of net sales) declined 110 bps year over year to 30.6% from 31.7% reported in the year-ago quarter. Selling and administrative expenses increased 5.9% year over year to $224 million.

During the first quarter, operating income declined 38.2% year over year to $145.8 million. The operating margin declined 460 bps to 12.1% from the prior-year quarter’s level.

Net income during the quarter totaled $101.7 million compared with $179.3 million reported in the year-ago quarter.

Balance Sheet

As of Mar 31, 2023, the company’s cash and cash equivalents amounted to $26.5 million compared with $45.6 million as of Dec 31, 2022. During the quarter, its net long-term debt amounted to $1,332.7 million compared with $ 1,361.8 million reported in the previous quarter. Goodwill during the quarter came in at $693.2 million compared with $688.4 million reported in the prior-year quarter.

During the quarter, net cash provided by operating activities amounted to $103.2 million against $(208.1) million reported in the prior-year period.

2023 Guidance

For 2023, Pool Corp expects adjusted EPS in the range of $14.62-$16.12 compared with the prior estimate of $16-$17. The Zacks Consensus Estimate for 2023 earnings is currently pegged at $16.43.

Zacks Rank & Key Picks

Pool Corp currently has a Zacks Rank #3 (Hold).

Some better-ranked stocks in the Zacks Consumer Discretionary sector are Hilton Grand Vacations Inc. HGV, Crocs, Inc. CROX and PlayAGS, Inc. AGS.

Hilton Grand Vacations currently sports a Zacks Rank #1 (Strong Buy). HGV has a trailing four-quarter earnings surprise of 12.1%, on average. Shares of HGV have declined 5.1% in the past year.  You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for HGV’s 2023 sales and EPS indicates a rise of 7.1% and 3.4%, respectively, from the year-ago period’s levels.

Crocs carries a Zacks Rank #2 (Buy). The company has a trailing four-quarter earnings surprise of 21.8%, on average. Shares of Crocs have increased 104.7% in the past year.

The Zacks Consensus Estimate for CROX’s 2023 sales and EPS indicates a rise of 12.5% and 2.5%, respectively, from the year-ago period’s levels.

PlayAGS carries a Zacks Rank #2. The company has a trailing four-quarter earnings surprise of 133.3%, on average. The stock has declined 7.9% in the past year.

The Zacks Consensus Estimate for AGS 2024 sales and EPS indicates a rise of 3% and 1,873.3%, respectively, from the year-ago period’s estimated levels.

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