Pentair Q1 Adj Profit Meets View, But Sales Miss; Backs 2014 Outlook

(RTTNews) - Diversified industrial manufacturing company Pentair Ltd. (PNR) reported Tuesday a profit for the first quarter that more than doubled from last year, despite a sales drop, reflecting strong margin improvement and lower charges.

Adjusted earnings per share matched analysts' expectations, while quarterly sales missed their estimates. The company also provided earnings and sales guidance for the second quarter, below Street view, and reaffirmed its full-year 2014 outlook.

"This quarter, our Food & Beverage and Residential & Commercial verticals delivered strong sales performance, helping to offset declines in our Energy and Infrastructure verticals. We were pleased with our strong double-digit EPS growth in the quarter which was driven by the continued momentum in productivity and synergies," Chairman and CEO Randall Hogan said in a statement.

The Schaffhausen, Switzerland-based company reported net income of $118.6 million or $0.59 per share for the first quarter, higher than $51.7 million or $0.25 per share in the prior-year quarter.

Results for both quarters include repositioning costs, acquisition and redomicile-related expenses, gain/loss on sale of a business and certain tax items.

Excluding items, adjusted net income for the quarter was $145.0 million or $0.73 per share, compared to $120.0 million or $0.58 per share in the year-ago quarter.

On average, 18 analysts polled by Thomson Reuters expected the company to report earnings of $0.73 per share for the quarter. Analysts' estimates typically exclude special items.

Net sales for the quarter decreased 3 percent to $1.73 billion from $1.77 billion in the same quarter last year, and missed seventeen Wall Street analysts' consensus estimate of $1.79 billion.

Valves & controls sales declined 9 percent to $534.8 million, while process technologies sales grew 5 percent to $418.3 million from the prior-year quarter.

Flow technologies sales decreased 7 percent to $364.1 million, while technical solutions sales edged up 1 percent to $415.3 million in the year-ago quarter.

Operating margin for the quarter expanded 620 basis points to 10.4 percent from last year as gross margin improved 400 basis points and selling, general and administrative as a percentage of total sales, declined 200 basis points.

Meanwhile, adjusted operating margin expanded only 170 basis points to 11.8 percent from last year.

Looking ahead to the second quarter, the company expects adjusted earnings in a range of $1.02 to $1.05 per share, on projected revenues of about $1.95 billion. Analysts expect the company to report second-quarter earnings of $1.10 per share on quarterly revenues of $2.03 billion.

For fiscal 2014, Pentair continues to anticipate adjusted earnings in the range of $3.85 to $4.00 per share on projected revenues of $7.7 billion. Street is currently looking for full-year 2014 earnings of $3.96 per share on annual revenues of $7.73 billion.

The company also noted that it is seeking authorization from its shareholders to increase the quarterly dividend to $0.30 per share for each of the third and fourth quarters of 2014 and the first and second quarters of 2015 from the current $0.25 per share. The quarterly dividend effective for the first and second quarters of 2014 is $0.25 per share.

"We expect to deliver another year of strong double-digit EPS growth. We continue to have confidence in our ability to deliver on the areas within our control. We believe the second quarter will represent our last significant year-over-year Australian project headwind and the second half should show improving growth," Hogan added.

In Tuesday's regular trading session, PNR is currently trading at $76.02, down $4.46 or 5.54% on a volume of 1.45 million shares.