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Pool Corp (POOL) Stock Up 28% in 3 Months: More Upside Left?

·3 min read

Pool Corporation POOL is poised to benefit from its robust base business, remodel and replacement activities as well as expansion initiatives. Also, solid demand across swimming pool maintenance supplies is adding to the upside.

In the past three months, shares of Pool Corp have gained 28% compared with the industry’s 6.8% growth. Moreover, an upward revision in earnings estimates for 2021 reflects analysts’ optimism regarding the company’s growth potential. In the past 60 days, the Zacks Consensus Estimate for fiscal 2021 earnings has moved up 30.6% to $12.28 per share.

Zacks Investment Research
Zacks Investment Research

Image Source: Zacks Investment Research

Factors Driving Growth

Pool Corp continues to benefit from solid performance of its base business segment. During first-quarter 2021, the company’s base business segment contributed 95.7% to total revenues. During the quarter, revenues from base business increased 50.7% year over year to $1,015.6 million. From the first to the fourth quarter of 2020, revenues from base business increased 13%, 14%, 27% and 39% on a year-over-year basis.

Notably, the company’s remodeling and replacement activities have been a key growth driver. During first-quarter 2021, building materials sales increased 34% following growth of 42% and 29% in the fourth and the third quarter of 2020. Markedly, the company is benefitting from strong demand in construction and remodel markets. In first-quarter 2021, equipment and chemical sales increased 61% and 18% year over year, respectively. The upside was primarily driven by solid demand for heaters, lighting, pumps, filters and pool remodeling. Meanwhile, chemical sales benefitted from increased dichlor and trichlor product pricing.

Going forward, the company believes that the flexibility of the new work-from-home norm is likely to act as a catalyst for investments in home improvements. Also, benefits from the continuation of the de-urbanization trends along with the strengthening of the southern migration are likely.

Meanwhile, Pool Corp continues to focus on expansion initiatives to drive revenues. Notably, the company is foraying into newer geographic locations to expand in existing markets and launch innovative product categories to boost its market share. It is also trying to expand through various acquisitions. In this regard, the company is assimilating the TWC Distributors acquisition, thereby expanding the Florida market with nine additional sales centers. Also, it intends to expand the Horizon network in Florida and California markets. We believe that the acquisitions along with the new locations are likely to boost customer relationship and services, thereby enhancing the top line.

Zacks Rank & Other Key Picks

Pool Corp sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Some other top-ranked stocks in the same space include OneWater Marine Inc. ONEW, Smith & Wesson Brands, Inc. SWBI and Sturm, Ruger & Company, Inc. RGR, each sporting a Zacks Rank #1.

OneWater Marine has a trailing four-quarter earnings surprise of 224.1%, on average.

2021 earnings for Smith & Wesson Brands and Sturm, Ruger & Company are expected to surge 392.7% and 17.9%, respectively.

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Pool Corporation (POOL) : Free Stock Analysis Report

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