|
Related Topics
|
Category: Stock Market and PoolCorp
Date: 18 October 2019 Stock Price: $212.97 We take a look at the 3rd quarter earnings release of their 2019 fiscal year of Poolcorp, a wholesale distributor of swimming pool equipment, parts and supplies, and related outdoor living products
|
About Poolcorp
POOLCORP is the world's leading wholesale distributor of swimming pool equipment, parts and supplies, and related outdoor living products. The company operates over 360 locations worldwide with more than 4,000 employees through three primary distribution networks: SCP Distributors LLC, Superior Pool Products LLC, and Horizon Distributors Inc. Our Sales Centers each operate with full profit and loss responsibility, giving our organization an entrepreneurial spirit.
With Sales Centers located across North America (US, Canada, and Mexico), Europe (France, UK, Spain, Portugal, Italy, Belgium, Germany, and Croatia), South America (Colombia), and Australia, we distribute a broad range of products to roughly 120,000 customers around the world, serving four principal markets:
POOLCORP’s Sales Center networks distribute non-discretionary pool maintenance products such as chemicals and replacement parts; discretionary products such as packaged pool kits, whole goods, irrigation and landscape products, including a complete line of commercial and residential irrigation products and parts, power equipment for the professional landscape market; specialty products such as outdoor lighting, grills, and outdoor kitchen components; as well as golf irrigation and water management products.
With Sales Centers located across North America (US, Canada, and Mexico), Europe (France, UK, Spain, Portugal, Italy, Belgium, Germany, and Croatia), South America (Colombia), and Australia, we distribute a broad range of products to roughly 120,000 customers around the world, serving four principal markets:
- Remodelers and builders installing new swimming pools and refurbishing existing pools
- Independent specialty retail stores selling outdoor living products to consumers
- Service companies performing pool and hot tub maintenance and repair
- Contractors serving in the irrigation and landscape maintenance markets
POOLCORP’s Sales Center networks distribute non-discretionary pool maintenance products such as chemicals and replacement parts; discretionary products such as packaged pool kits, whole goods, irrigation and landscape products, including a complete line of commercial and residential irrigation products and parts, power equipment for the professional landscape market; specialty products such as outdoor lighting, grills, and outdoor kitchen components; as well as golf irrigation and water management products.
Overview of Poolcorp's latest earnings report
The data provided below refers to the latest quarter's data unless specified otherwise
- Net sales: $898.5 million (up from $811.311 million from the same quarter of the previous year)
- Net sales increased by 10.7% over the last 12 months
- Cost of sales: $640.569 million (up from $576.308 million for the same quarter of the previous year)
- Cost of sales increased by 11.15% over the last 12 months
- Net income: $79.525 million (up from $69.261 million for the same quarter of the previous year)
- Diluted earnings per share: $1.95 (up from $1.66 for the same quarter of the previous year)
- Annual dividend paid: $0.55
- Dividend yield: 1.03%
- Diluted weighted-average shares outstanding: 40.865 million (up from 41.797 million for the same quarter of the previous year)
- Cash and cash equivalents: 36.694 million
- Cash and cash equivalents per share: $0.89
- Cash and cash equivalents makes up 0.42% of Poolcorp's market capital
- Cash and cash equivalents makes up 3.7% of Poolcorp's current assets
- Inventories: $616.217 million
- Inventories makes up 41.6% of Poolcorp's total assets
- Stockholders equity of Poolcorp: $405.970 million
- Stockholders equity per share: $9.93
- So Poolcorp is trading at 21.35 times its stockholders equity per share which is well outside the expected range of between 2 and 4 times that most firms tend to trade at.
- Cash generated from operations (for the 9 months): $243.253 million
- Cash generated from operations per share (for the 9 months): $5.95
Poolcorp's management commentary on the results and earnings guidance
COVINGTON, LA. (October 17, 2019) – Pool Corporation (NASDAQ/GSM:POOL) today reported record results for the third quarter of 2019. "Demand for swimming pooland outdoor living products remains healthy. Favorable weather conditions and outstanding execution by our teams allowed us to deliver solid results for the quarter. With a continued focus on operational excellence, we are in position for a strong finish to the year,” said Peter D. Arvan, President and CEO.
Net sales increased 11% to a record $898.5 million in the third quarter of 2019 compared to $811.3 million in the third quarter of 2018, while base business sales grew 9%. During the quarter, sales continued to benefit from strong demand for discretionary products as evidenced by higher sales growth in construction materials and products used in the repair and replacement of in-ground pools. Additionally, sales were favorably impacted approximately 1% from an extra selling day in the third quarter of 2019 compared to the third quarter of 2018. Gross profit increased 10% to a record $257.9 million in the third quarter of 2019 from $235.0 million in the same period of 2018.
Base business gross profit improved 8% over the third quarter of 2018. Gross margin decreased 30 basis points to 28.7% in the third quarter of 2019 compared to 29.0% in the third quarter of 2018. Gross margins in the third quarter of 2018 reflected benefits from strategic inventory purchases ahead of vendor price increases resulting in a comparative decline in the third quarter of 2019. Selling and administrative expenses (operating expenses) increased 8% to $153.4 million in the third quarter of 2019 compared to the third quarter of 2018, a portion of which reflects expenses from our most recent acquisitions.
Base business operating expenses were up 5% over the comparable 2018 period, reflecting increases in variable labor and freight costs. As a percentage of net sales, base business operating expenses decreased to 16.9% in the third quarter of 2019 compared to 17.6% in the third quarter of 2018. Operating income for the third quarter of 2019 increased to a record $104.5 million, up 13% compared to the same period in 2018. Operating margin was 11.6% in the third quarter of 2019 compared to 11.4% in the third quarter of 2018, while base business operating margin improved 40 basis points from the prior year to 11.8% in the third quarter of 2019. We recorded a $4.5 million, or $0.11 per diluted share, tax benefit from Accounting Standards Update (ASU) 2016-09,
Improvements to Employee Share Based Payment Accounting, in the quarter ended September 30, 2019 compared to a tax benefit of $3.3 million, or $0.08 per diluted share, realized in the same period of 2018.
"Through the remainder of 2019, we will remain focused on creating value for our customers, exceptional returns for our shareholders and great opportunities for our employees. Based on our results to date and expectations for the remainder of the year, we are increasing and narrowing our annualearnings guidance range from $6.09 to $6.34 per diluted share to $6.20 to $6.40 per diluted share,” said Arvan.
Net sales increased 11% to a record $898.5 million in the third quarter of 2019 compared to $811.3 million in the third quarter of 2018, while base business sales grew 9%. During the quarter, sales continued to benefit from strong demand for discretionary products as evidenced by higher sales growth in construction materials and products used in the repair and replacement of in-ground pools. Additionally, sales were favorably impacted approximately 1% from an extra selling day in the third quarter of 2019 compared to the third quarter of 2018. Gross profit increased 10% to a record $257.9 million in the third quarter of 2019 from $235.0 million in the same period of 2018.
Base business gross profit improved 8% over the third quarter of 2018. Gross margin decreased 30 basis points to 28.7% in the third quarter of 2019 compared to 29.0% in the third quarter of 2018. Gross margins in the third quarter of 2018 reflected benefits from strategic inventory purchases ahead of vendor price increases resulting in a comparative decline in the third quarter of 2019. Selling and administrative expenses (operating expenses) increased 8% to $153.4 million in the third quarter of 2019 compared to the third quarter of 2018, a portion of which reflects expenses from our most recent acquisitions.
Base business operating expenses were up 5% over the comparable 2018 period, reflecting increases in variable labor and freight costs. As a percentage of net sales, base business operating expenses decreased to 16.9% in the third quarter of 2019 compared to 17.6% in the third quarter of 2018. Operating income for the third quarter of 2019 increased to a record $104.5 million, up 13% compared to the same period in 2018. Operating margin was 11.6% in the third quarter of 2019 compared to 11.4% in the third quarter of 2018, while base business operating margin improved 40 basis points from the prior year to 11.8% in the third quarter of 2019. We recorded a $4.5 million, or $0.11 per diluted share, tax benefit from Accounting Standards Update (ASU) 2016-09,
Improvements to Employee Share Based Payment Accounting, in the quarter ended September 30, 2019 compared to a tax benefit of $3.3 million, or $0.08 per diluted share, realized in the same period of 2018.
"Through the remainder of 2019, we will remain focused on creating value for our customers, exceptional returns for our shareholders and great opportunities for our employees. Based on our results to date and expectations for the remainder of the year, we are increasing and narrowing our annualearnings guidance range from $6.09 to $6.34 per diluted share to $6.20 to $6.40 per diluted share,” said Arvan.
Poolcorp (NASDAQ:POOL) stock price history
The image below, obtained from Google, shows the stock price history of Great Southern Bank (Nasdaq: POOL) for the last 5 years. And it's been an exceptional time for Poolcorp stockholders. 5 years ago Poolcorp was trading at around $57.80 and its currently trading at $212.97 So the stock has provided Poolcorp stockholders with a massive return of 268% over the last 5 years.
The stock of Poolcorp is trading at very close to its 52 week high of $228,.19 and far away from its 52 week low of $136.83, which is a clear indication that the short term sentiment and momentum of Poolcorp's stock is very positive.
The stock of Poolcorp is trading at very close to its 52 week high of $228,.19 and far away from its 52 week low of $136.83, which is a clear indication that the short term sentiment and momentum of Poolcorp's stock is very positive.
Recent coverage of Poolcorp
The extract below discusses Poolcorp in more detail as obtained from TheStreet.com
Among the underlying components of the Russell 3000 index, we saw noteworthy options trading volume today in Pool Corp (POOL - Get Report), where a total of 1,369 contracts have traded so far, representing approximately 136,900 underlying shares. That amounts to about 73% of POOL's average daily trading volume over the past month of 187,410 shares. Especially high volume was seen for the $200 strike put option expiring November 15, 2019, with 435 contracts trading so far today, representing approximately 43,500 underlying shares of POOL.
Among the underlying components of the Russell 3000 index, we saw noteworthy options trading volume today in Pool Corp (POOL - Get Report), where a total of 1,369 contracts have traded so far, representing approximately 136,900 underlying shares. That amounts to about 73% of POOL's average daily trading volume over the past month of 187,410 shares. Especially high volume was seen for the $200 strike put option expiring November 15, 2019, with 435 contracts trading so far today, representing approximately 43,500 underlying shares of POOL.
Poolcorp (NASDAQ: POOL) latest stock valuation
So based on the 3rd quarter 2019 earnings report of Poolcorp what do we value Poolcorp's stock at? Based on the earnings report released by the group our valuation model provides a target (full value) price for Poolcorp at $176.60 a stock. We therefore believe the stock of Poolcorp is overvalued.
We suggest long term fundamental and value investors look to enter the stock at least 10% below our current target (full value) price of $176.60. Therefore we believe a good entry point into Poolcorp is at $158.90 or below. We expect the stock of Poolcorp to pull back to levels closer to our target (full value) price in coming weeks and months as we cannot see it holding on to its current stock price levels for long, based on their latest earnings release.
We suggest long term fundamental and value investors look to enter the stock at least 10% below our current target (full value) price of $176.60. Therefore we believe a good entry point into Poolcorp is at $158.90 or below. We expect the stock of Poolcorp to pull back to levels closer to our target (full value) price in coming weeks and months as we cannot see it holding on to its current stock price levels for long, based on their latest earnings release.
Next earnings release of Poolcorp
It is expected that the 4th quarter earnings release of WPoolcorp will be released in early January 2020