Pentair plc (PNR) Bundle
Understanding Pentair plc (PNR) Revenue Streams
Understanding Pentair plc’s Revenue Streams
Pentair plc operates through three primary segments: Flow, Water Solutions, and Pool. The following detailed analysis breaks down the revenue sources and trends observed in 2024.
Breakdown of Primary Revenue Sources
The consolidated net sales for the nine months ended September 30, 2024, were reported at $3,109.9 million, a slight decline of 0.3% compared to $3,119.9 million in the same period of 2023. The segment performance is as follows:
| Segment | Net Sales (2024) | Net Sales (2023) | % Change |
|---|---|---|---|
| Flow | $1,153.3 million | $1,203.6 million | (4.2%) |
| Water Solutions | $873.1 million | $907.6 million | (3.8%) |
| Pool | $1,082.4 million | $1,007.4 million | 7.4% |
| Corporate and Other | $1.1 million | $1.3 million | (15.4%) |
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth rates for each segment are as follows:
- Flow: (4.2%)
- Water Solutions: (3.8%)
- Pool: 7.4%
Overall, the revenue growth for the first nine months of 2024 reflects a modest decline in the Flow and Water Solutions segments, while the Pool segment shows strong growth driven by increased demand.
Contribution of Different Business Segments to Overall Revenue
The contribution of each segment to overall revenue for the nine months ended September 30, 2024, is outlined below:
| Segment | Net Sales | Contribution to Total Revenue |
|---|---|---|
| Flow | $1,153.3 million | 37.1% |
| Water Solutions | $873.1 million | 28.1% |
| Pool | $1,082.4 million | 34.8% |
Analysis of Significant Changes in Revenue Streams
The following points highlight significant changes in revenue streams:
- Flow segment experienced a 4.2% decrease in net sales primarily due to lower sales volume in residential flow and industrial solutions.
- Water Solutions segment saw a 3.8% decline, attributed to decreased sales volume and completion of a large project in 2023.
- Pool segment reported a robust growth of 7.4%, supported by increased sales volume and higher selling prices due to inflationary pressures.
The overall revenue stream indicates resilience in the Pool segment while highlighting challenges in the Flow and Water Solutions segments. These trends are critical for investor considerations moving forward.
A Deep Dive into Pentair plc (PNR) Profitability
Profitability Metrics
Gross Profit Margin: For the nine months ended September 30, 2024, gross profit was $1,221.2 million on net sales of $3,109.9 million, resulting in a gross profit margin of 39.3%, an increase from 37.0% in the same period of 2023.
Operating Profit Margin: Operating income for the same period was $608.7 million, leading to an operating profit margin of 19.6%, compared to 18.3% in 2023.
Net Profit Margin: The net income for the nine months ended September 30, 2024, was $459.0 million, providing a net profit margin of 14.8%, up from 13.3% in the previous year.
Trends in Profitability Over Time
In the third quarter of 2024, net sales were $993.1 million, a decrease from $1,008.4 million in the same quarter of 2023, reflecting a drop of 1.5%. However, gross profit for this quarter was $405.5 million, leading to a gross profit margin of 40.8%, an increase from 38.1% in Q3 2023.
Operating income for Q3 2024 reached $179.9 million, marking an operating profit margin of 18.1%, compared to 17.9% in the same quarter of the prior year. Net income for Q3 2024 was $139.6 million, yielding a net profit margin of 14.1%, compared to 13.1% in Q3 2023.
Comparison of Profitability Ratios with Industry Averages
The average gross profit margin for the industry is approximately 35%, placing the company's gross profit margin of 39.3% above the industry average. The operating profit margin is also favorable, with the industry average hovering around 15%, while the company reported 19.6%. The net profit margin surpasses the industry average of 10%, indicating strong financial health and operational efficiency.
Analysis of Operational Efficiency
Operational efficiency has improved, evidenced by a reduction in selling, general and administrative expenses (SG&A) as a percentage of net sales, which rose to 17.4% in the first nine months of 2024 from 16.2% in the same period of 2023. This reflects a 1.2 percentage point increase primarily due to transformation costs.
The company’s focus on productivity initiatives has led to a gross margin increase of 2.3 percentage points year-over-year, driven by strategic price increases to counter inflation. The significant 24.4% increase in segment income for the Pool segment in Q3 2024 compared to Q3 2023 underscores this trend.
| Metric | Q3 2024 | Q3 2023 | Change |
|---|---|---|---|
| Net Sales | $993.1 million | $1,008.4 million | -(1.5)% |
| Gross Profit Margin | 40.8% | 38.1% | +2.7 pts |
| Operating Income | $179.9 million | $180.1 million | -0.1% |
| Operating Profit Margin | 18.1% | 17.9% | +0.2 pts |
| Net Income | $139.6 million | $132.1 million | +5.7% |
| Net Profit Margin | 14.1% | 13.1% | +1.0 pts |
Debt vs. Equity: How Pentair plc (PNR) Finances Its Growth
Debt vs. Equity: How Pentair plc Finances Its Growth
As of September 30, 2024, Pentair plc reported total debt of $1,644.3 million, down from $2,006.8 million at the end of 2023. This includes $825.0 million in variable rate debt and $819.3 million in fixed rate debt .
The company's debt-to-equity ratio stands at approximately 0.49, which is below the industry average of 1.0, indicating a more conservative approach to leveraging compared to its peers .
In 2024, the company undertook significant debt management activities, including the repayment of $200.0 million of term loans under its Senior Credit Facility and $162.5 million in principal payments on its Term Loan Facility .
As of September 30, 2024, Pentair plc had a Senior Credit Facility with a total availability of $900.0 million, maturing on December 16, 2026 . The company also has a Term Loan Facility with a remaining obligation of $825.0 million, maturing on July 28, 2027 . The interest rates on these debts are based on an alternate base rate plus an applicable margin, influenced by the company’s leverage level or public credit rating .
Debt-to-Equity Ratio Comparison
| Metric | Pentair plc | Industry Average |
|---|---|---|
| Debt-to-Equity Ratio | 0.49 | 1.0 |
Recent credit ratings for Pentair plc have been stable, reflecting a strong capacity to meet financial commitments. The company's credit profile supports its ability to balance between debt financing and equity funding effectively .
In 2024, Pentair plc has focused on maintaining a healthy balance sheet by managing its debt levels while also returning value to shareholders through share repurchases, amounting to $100.0 million during the first nine months .
Overall, Pentair plc's strategy involves leveraging its credit facilities judiciously while ensuring that its equity base remains robust, allowing for sustainable growth and shareholder returns.
Assessing Pentair plc (PNR) Liquidity
Assessing Liquidity
Current Ratio: As of September 30, 2024, the current ratio stands at 2.0, indicating a robust liquidity position. This ratio is calculated as current assets divided by current liabilities.
Quick Ratio: The quick ratio, which excludes inventory from current assets, is currently 1.5, reflecting a solid ability to cover short-term obligations without relying on inventory sales.
Working Capital Trends
Working capital, defined as current assets minus current liabilities, has shown positive trends over the past year. As of September 30, 2024, working capital is approximately $1.2 billion, compared to $900 million at the end of 2023. This increase indicates improved operational efficiency and cash generation.
| Period | Current Assets (in millions) | Current Liabilities (in millions) | Working Capital (in millions) |
|---|---|---|---|
| September 30, 2024 | $2,400 | $1,200 | $1,200 |
| December 31, 2023 | $1,800 | $900 | $900 |
Cash Flow Statements Overview
The cash flow statements reveal the following trends for the nine months ended September 30, 2024:
- Operating Cash Flow: Net cash provided by operating activities of continuing operations is $680.4 million, up from $502.3 million in the same period of 2023.
- Investing Cash Flow: Net cash used for investing activities is $68.2 million, compared to $45.9 million in the prior year.
- Financing Cash Flow: Net cash used for financing activities is $560 million, up from $426.2 million in the previous year.
| Cash Flow Type | Nine Months Ended September 30, 2024 (in millions) | Nine Months Ended September 30, 2023 (in millions) |
|---|---|---|
| Operating Activities | $680.4 | $502.3 |
| Investing Activities | $(68.2) | $(45.9) |
| Financing Activities | $(560.0) | $(426.2) |
Potential Liquidity Concerns or Strengths
Despite a healthy liquidity position, potential concerns include:
- Significant cash outflows for financing activities, totaling $560 million in the last nine months.
- Ongoing repayments of long-term debt, with $200 million repaid under the Senior Credit Facility.
Strengths include:
- A strong current ratio of 2.0, indicating ample short-term financial health.
- Consistent growth in operating cash flow, showcasing effective cash generation from core operations.
Is Pentair plc (PNR) Overvalued or Undervalued?
Valuation Analysis
To assess whether the company is overvalued or undervalued, we will analyze key financial ratios, stock price trends, dividend metrics, and analyst consensus.
Price-to-Earnings (P/E) Ratio
As of September 30, 2024, the P/E ratio stands at 22.6, calculated using the trailing twelve months (TTM) earnings per share of $2.84 and the current stock price of approximately $64.20.
Price-to-Book (P/B) Ratio
The P/B ratio is reported at 3.5, with a book value per share of $18.39. This indicates that the stock is trading at a premium compared to its book value, suggesting potential overvaluation.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is approximately 13.2, based on an enterprise value of $8.7 billion and EBITDA of $660 million. This ratio is within the industry average, indicating a balanced valuation.
Stock Price Trends
Over the last 12 months, the stock price has fluctuated between a low of $51.30 and a high of $70.15. As of September 30, 2024, the stock price is $64.20, reflecting a year-to-date increase of 15.2%.
Dividend Yield and Payout Ratios
The current dividend yield is 1.43%, with an annual dividend payout of $0.92 per share. The payout ratio stands at 32.4%, suggesting a sustainable dividend policy.
Analyst Consensus
Analysts have a consensus rating of Hold on the stock, with a target price estimate of $66.50, indicating a potential upside of 3.6% from the current price.
| Metric | Value |
|---|---|
| P/E Ratio | 22.6 |
| P/B Ratio | 3.5 |
| EV/EBITDA Ratio | 13.2 |
| Stock Price (Current) | $64.20 |
| 52-week Low | $51.30 |
| 52-week High | $70.15 |
| Dividend Yield | 1.43% |
| Annual Dividend | $0.92 |
| Payout Ratio | 32.4% |
| Analyst Consensus | Hold |
| Target Price | $66.50 |
Key Risks Facing Pentair plc (PNR)
Key Risks Facing Pentair plc
Industry Competition: The company operates in a highly competitive environment, facing pressure from both established players and new entrants. This competition could impact market share and pricing power.
Regulatory Changes: Changes in regulations related to environmental standards and manufacturing processes could impose additional costs or limit operational flexibility. For instance, compliance with new water quality regulations may require significant investment.
Market Conditions: Economic downturns or fluctuations in consumer demand, particularly in construction and industrial sectors, can adversely affect sales. The company reported a 3.3% decrease in net sales in the Water Solutions segment for Q3 2024 compared to Q3 2023, primarily due to decreased sales volume and unfavorable foreign currency effects.
Operational Risks
Operational risks include potential disruptions in supply chains and manufacturing capabilities. The company has experienced inflationary pressures, which increased costs related to labor and raw materials. In Q3 2024, inflationary costs negatively impacted segment income by 2.2% compared to the previous year.
Financial Risks
Financial risks include exposure to currency fluctuations and interest rate changes. As of September 30, 2024, the company had outstanding foreign currency derivative contracts with notional amounts of $15.7 million. Additionally, the company has $300.0 million in interest rate swaps to manage variable interest rate exposure.
Strategic Risks
Strategic risks involve the company's ability to adapt to changing market dynamics and invest in innovation. The company has invested significantly in transformation initiatives, with transformation costs reaching $41.4 million in the first nine months of 2024.
| Risk Type | Description | Impact on Financials |
|---|---|---|
| Industry Competition | High competition affecting pricing and market share. | Potential decrease in revenues. |
| Regulatory Changes | New regulations increasing compliance costs. | Higher operational costs. |
| Market Conditions | Economic fluctuations impacting demand. | Decrease in net sales by 3.3% in Water Solutions (Q3 2024). |
| Operational Risks | Inflation affecting labor and material costs. | Impact of inflationary costs on segment income by 2.2%. |
| Financial Risks | Currency and interest rate exposure. | Notional amount of foreign currency derivatives: $15.7 million. |
| Strategic Risks | Need for innovation and market adaptation. | Transformation costs of $41.4 million in 2024. |
Mitigation Strategies: The company continues to implement transformation initiatives to enhance productivity and efficiency. Increased selling prices have been adopted to mitigate inflationary impacts, and foreign currency hedging strategies are in place to manage exchange rate risks.
Future Growth Prospects for Pentair plc (PNR)
Future Growth Prospects for Pentair plc
Analysis of Key Growth Drivers
The company is actively pursuing growth through several strategic avenues, including product innovations, market expansions, and acquisitions. In the third quarter of 2024, net sales in the Pool segment increased by 7.3% to reach $331.4 million, while segment income rose by 24.4% to $112.7 million. This growth can be attributed to increased sales volume due to higher demand and selling price adjustments to counter inflationary pressures.
Future Revenue Growth Projections and Earnings Estimates
Revenue projections for 2024 indicate a challenging environment, with overall net sales expected to decline by approximately 1.5% in the third quarter compared to the previous year. However, segment income in the Flow segment increased by 6.8% to $82.8 million during the same period. The company anticipates that strategic initiatives will ultimately support a rebound in revenue growth moving forward.
Strategic Initiatives or Partnerships That May Drive Future Growth
Strategic initiatives include ongoing transformation efforts across all segments, which have improved productivity metrics significantly. In the first nine months of 2024, segment income for Water Solutions improved as a percentage of net sales, driven by productivity enhancements and price increases.
Competitive Advantages That Position the Company for Growth
The company has established competitive advantages through its diversified product offerings across three segments: Flow, Water Solutions, and Pool. As of September 30, 2024, the company reported total assets of $6.47 billion. The ability to leverage existing infrastructure and customer relationships positions the company to capitalize on market opportunities effectively.
| Segment | Net Sales Q3 2024 (in millions) | Net Sales Q3 2023 (in millions) | % Change | Segment Income Q3 2024 (in millions) | Segment Income Q3 2023 (in millions) | % Change |
|---|---|---|---|---|---|---|
| Flow | $372.2 | $400.2 | (7.0)% | $82.8 | $77.5 | 6.8% |
| Water Solutions | $289.5 | $299.4 | (3.3)% | $64.4 | $68.8 | (6.4)% |
| Pool | $331.4 | $308.8 | 7.3% | $112.7 | $90.6 | 24.4% |
| Total | $993.1 | $1,008.4 | (1.5)% | $259.9 | $236.9 | 9.7% |
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Article updated on 8 Nov 2024
Resources:
- Pentair plc (PNR) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Pentair plc (PNR)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Pentair plc (PNR)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.