Pool stock tumble as 2024 outlook falls short of expectations

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Pool stock tumble as 2024 outlook falls short of expectations
Credit: © Reuters.

COVINGTON, La. - Pool (NASDAQ: POOL ) Corporation (NASDAQ:POOL), the world's largest wholesale distributor of swimming pool and related backyard products, reported its fourth quarter earnings, slightly surpassing analyst expectations for earnings per share (EPS) but falling short on revenue.

The company announced a Q4 EPS of $1.32, which was $0.05 higher than the analyst estimate of $1.27. However, revenue for the quarter was $1 billion, missing the consensus estimate of $1.02 billion.

Despite beating EPS estimates for the fourth quarter, Pool Corp 's stock fell approximately 4% as the company's guidance for fiscal year 2024 was below analyst expectations. The company provided an EPS outlook of $13.00 to $14.00, whereas analysts had anticipated a higher consensus of $14.20.

This cautious forecast is driving the negative market response, highlighting concerns over the company's growth prospects amid economic headwinds.

In a year-over-year comparison, the company's annual net sales for 2023 reached $5.5 billion, marking the second highest in its history but reflecting a 10% decrease from the $6.2 billion reported in 2022. The company attributed the sales decline to unfavorable weather in the first half of the year, which delayed pool openings, and a slowdown in new pool construction due to elevated interest rates.

Peter D. Arvan, president and CEO of Pool Corporation, commented on the year's performance, stating, "After a challenging start, we achieved our second highest annual sales in company history... I am proud of our team who remained focused on delivering an outstanding customer experience, which enabled us to outperform the industry through innovation, execution and collaborative partnerships."

The company's operating income for 2023 was $746.6 million, a 27% decrease from $1.0 billion in 2022, with operating margin also declining from 16.6% to 13.5%. The decrease in operating income was primarily due to lower sales volumes, particularly for discretionary pool products, and inflationary pressures on wages, rent, facility costs, and insurance.

Looking ahead, Pool Corp remains confident in its position within the industry, citing the consistent additions to the installed base of swimming pools and the demand for maintenance and enhancement products as long-term growth drivers. Despite the stock's negative reaction to the forward-looking guidance, the company's management is optimistic about capitalizing on opportunities for growth and exceptional shareholder returns.

Investors will be closely monitoring Pool Corp's performance in the coming year to see if the company can navigate the challenges it faces and achieve the growth outlined in its 2024 outlook.

InvestingPro Insights

Pool Corporation (NASDAQ:POOL) has demonstrated resilience in the face of economic challenges, as evidenced by its earnings surpassing analyst expectations for EPS in the latest quarter. The InvestingPro data provides a deeper look into the company's financial health and market position. With a market capitalization of 15.05 billion USD and a P/E ratio holding steady at 27.78, the company shows significant valuation in the market.

InvestingPro Tips highlight a mix of achievements and concerns for Pool Corporation. Notably, the company has raised its dividend for 13 consecutive years, illustrating a strong commitment to shareholder returns. This consistent performance is further underpinned by the fact that Pool Corp has maintained dividend payments for an impressive 20 consecutive years. On the liquidity front, the company's liquid assets surpass its short-term obligations, indicating a sound financial position to meet its immediate liabilities.

However, analysts have tempered their outlook, with 8 analysts having revised their earnings downwards for the upcoming period, and a consensus anticipating a sales decline in the current year. These revisions align with the cautious guidance provided by Pool Corp for fiscal year 2024. Additionally, the company is trading at a high Price / Book multiple of 10.61, which might raise questions about valuation among investors.

Amid these mixed signals, Pool Corporation's stock is trading near its 52-week high, with a price percentage of 96.07% of that high, reflecting investor confidence in the company's ability to navigate through economic headwinds. Moreover, the company's return on assets stands at a robust 15.27%, showcasing its efficiency in utilizing its assets to generate profits.

For investors looking to delve deeper into Pool Corporation's prospects, there are additional InvestingPro Tips available that can provide further insights into the company's performance and potential. By using the coupon code PRONEWS24, investors can receive an additional 10% off a yearly or biyearly Pro and Pro+ subscription to access these valuable tips.

As Pool Corp faces the year ahead, investors and analysts will be watching to see if the company can leverage its strong historical performance and financial stability to overcome the anticipated challenges and deliver on its growth and profitability targets.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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