Yahoo Finance Why Are Pool (POOL) Shares Soaring Today
What Happened:
Shares of swimming pool distributor Pool (NASDAQ:POOL) jumped 10.8% in the afternoon session after the company reported second-quarter earnings results. Pool narrowly topped analysts' revenue and EPS expectations this quarter. Notably topline growth deceleration moderated (down 5% vs 7% drop in the previous quarter) amidst the observed trend of "lower consumer spending on high dollar discretionary items." Zooming out, we think this was a decent quarter, showing the company is staying on target.
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What is the market telling us:
Pool's shares are quite volatile and over the last year have had 4 moves greater than 5%. But moves this big are very rare even for Pool and that is indicating to us that this news had a significant impact on the market's perception of the business.
The previous big move we wrote about was 14 days ago, when the company gained 6.1% as investors seem to be rotating out of large-cap tech winners like NVDA, GOOGL, and MSFT and into smaller cap stocks, with housing stocks as a bright spot in particular. The rotation was likely sparked by the inflation report by the Bureau of Labor Statistics. It revealed that CPI (Consumer Price Index - a gauge of the average price consumers pay for goods and services) for the month of June 2024 came in better than expected at 3% year on year (the lowest level in more than three years).
The recent inflation prints supported the argument that the Fed will start cutting rates this year as the headline figures moved closer to the 2% target. Lower rates greatly impact the housing market, which has been tepid in the last year-plus. Specifically, lower rates make homebuying more affordable for consumers because on the same value home, monthly payments are less with a lower mortgage rate.
Before rates began to rise 2022, many potential homebuyers anchored on a home value they could afford--let's say $450,000. As rates rose, the home they could afford with the same monthly payment fell--let's say towards $300,000. However, they weren't very excited about buying a lesser home after having their eyes on higher-value homes. Many chose not to transact.
On the other side of the coin, many homeowners with mortgage rates in the 2-3% range chose not to sell because of the prospect of having to buy a new home with a 6-8% mortgage rate attached to it. Demand suffered. Supply suffered. The inflation report could be an early sign that the housing market could thaw and even become hot if the Fed cuts rates.
Pool is down 7.3% since the beginning of the year, and at $359.94 per share it is trading 14.1% below its 52-week high of $418.97 from March 2024. Investors who bought $1,000 worth of Pool's shares 5 years ago would now be looking at an investment worth $1,895.
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