Pool Corp. shares gain as JPM adds to focus list

Shares of Pool Corp. rose in Tuesday trading after an analyst predicted the distributor's strong execution and improved gross margins will let it exceed its profit targets.

Analyst Curt Woodworth added the pool supplier's stock to JPMorgan's "Focus List" of preferred investments. He has a $29 price target on the stock, implying he expects it to rise 43 percent over the next 18 months.

In a note to investors, the analyst lowered his profit estimate for 2008 by a dime to $1.40 per share, citing a "cool start" to the second quarter, but that still leaves it ahead of the average analyst estimate of $1.29 per share, according to a Thomson Financial survey.

His estimate assumes organic sales will decline 6 percent this year, under the low end of management guidance of flat to down 5 percent.

However, Woodworth said he expects higher gross margins to be driven by low cost sourcing, improved vendor management and vendor consolidation, and the recent purchase of National Pool Tile, which has higher margins than Pool Corp.

"We believe that competitive pressures in the market will not worsen meaningfully in 2008 and in fact that the market is being very disciplined on price," Woodworth wrote. "Pool has commented that they will not chase low price business in 2008 as they did in 2007."

The Covington, La.-based business distributes pool and related backyard products at nearly 300 sales centers in North America and Europe. Pool last month raised its quarterly dividend by 8 percent.

Pool shares added 89 cents, or 4.4 percent, to $21.13. The stock has traded between $17.39 and $42.62 over the past 52 weeks.