Here’s why you should keep Pool Corp (POOL) stock now

Pool Corporation POOL is likely to benefit from its expansion efforts, remodeling and replacement activities and capacity-building initiatives. However, inflationary pressures and coronavirus-related problems are a concern.

Let us discuss the factors that highlight why investors should keep the stock for the time being.

Factors driving growth

Pool Corp focuses on expansion initiatives to increase revenue. The company is venturing into newer geographic locations to expand into existing markets and launch innovative product categories to increase market share. It is trying to expand through various acquisitions. During the first quarter of 2022, the company increased its presence in the DIY market segment with the acquisition of Pinch A Penny. During the quarter, POOL opened two new franchise locations. The company stated that it has begun work on chemical sourcing and product management and that it reports on lively store traffic and solid demand across the platform. Given the synergies combined with its robust development pipeline, the company expects the initiative to drive growth in the coming period. The company expects that acquisitions at new locations will contribute 5-6% to POOLCORP’s revenue growth in 2022.

Pool Corp continues to benefit from remodeling and replacement activities. During the first quarter of 2022, sales of building materials increased 29% year over year. The company benefits from a strong demand in the construction and remodeling markets. Sales of equipment and chemicals increased by 18% and 58% year-over-year, respectively, in the first quarter. The upside was primarily driven by a solid demand for heaters, pumps, filters, lighting and automation. Sales of chemicals were primarily driven by solid demand and improved supply. The company believes that the flexibility of the new work-from-home norm is likely to act as a catalyst for investment in home improvements. Benefits of new products (such as automation and the connected pool) and strengthening of southern migration are likely.

The company wins on solid demand, healthy contractor backlogs and capacity-building initiatives. This and a solid performance of basic business promises well. In the first quarter of 2022, the company’s Base Business segment contributed 94% to total revenue. During the quarter, Base Business revenue increased 25.6% year-over-year to $ 1,328.1 million. Increased demand for outdoor products benefited the company. The segment’s operating margins increased by 430 basis points year over year, backed by supply chain management initiatives.

Given the ability to drive organic growth and manage the cost structure through execution and capacity building, the company raised its guidance for 2022. The company expects 2022 earnings per share. – $ 17.94. It expects sales to be in line with the high end of the previous net sales guidance of 17-19%. The company expects positive demand trends to continue in 2022.

In the past year, the shares of Pool Corp have fallen 26.2% compared to the fall of the industry of 65.5%.


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Worries

The COVID-19 pandemic has significantly affected economic activity and markets worldwide. Going forward, risks due to the resurgence of COVID-19 cases in some markets, new domestic orders or government mandates and adverse economic conditions triggered by the crisis may affect the company.

Pool Corp is constantly incurring higher costs, which is a bulge of margins. Inflationary cost increases in compensation, health care, freight and rent lead to higher spending. During the first quarter, selling expenses came up to $ 965.5 million, an increase of 27.1% over the previous quarter. Sales and administration expenses increased 22.9% year-over-year to $ 211.5 million. We believe that the company must work hard to reduce costs to achieve high margins. For 2022, the company expects inflationary pressures to be 10%.

Zacks Rank & Key Picks

Pool Corp currently has a Zacks Rank # 3 (Team). You can see the complete list of today’s Zacks # 1 Rank (Strong Buy) shares here.

Some better ranked stocks in the Zacks Consumer Discretionary sector are Civeo Corporation CVEO, Funko, Inc. FNKO and Bluegreen Vacations Holding Corporation BVH.

Civeo currently has a Zacks Rank # 1. The company has a subsequent four-quarter earnings surprise of 1,565.1% on average. The shares in the company have risen 48.9% in the past year.

The Zacks Consensus Estimate for CVEO’s 2022 sales and EPS indicates growth of 12.5% ​​and 1,450%, respectively, from the level of the previous year.

Funko has a Zacks Rank # 2 (Buy). FNKO has a subsequent four-quarter earnings surprise of 78.7% on average. The company’s shares have fallen by 6.1% in the past year.

The Zacks Consensus Estimate for Funko’s current fiscal year sales and EPS suggest growth of 26.8% and 31%, respectively, from the levels reported last year.

Bluegreen Vacations has a Zacks Rank # 2. BVH has a subsequent four-quarter earnings surprise of 85.9% on average. The stock has risen 33.6% in the past year.

The Zacks Consensus Estimate for BVH’s current financial year sales and EPS indicates growth of 11.2% and 35.1%, respectively, from the levels reported last year.

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Pool Corporation (POOL): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect Nasdaq, Inc.

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