Pool Corporation (POOL 1.40%), which describes itself as the "world's largest wholesale distributor of swimming pool and related outdoor living products," is slated to report its second-quarter 2021 results before the market open on Thursday, July 22. An analyst conference call is scheduled to follow at 11 a.m. EDT.
Investors will probably be approaching the report with optimism. The company's business has gotten a boost from the pandemic, which has driven people to spend more time than usual at their homes. This dynamic continued last quarter, with the company demolishing Wall Street's consensus earnings estimate. That was at least the fourth consecutive quarter that Pool Corp. surpassed earnings expectations, with the last two beats being big ones.
In 2021, shares of the consumer-discretionary company have returned 23.6% through July 16, compared with the S&P 500's 16.1%. Last year, Pool Corp. stock returned 77% -- more than four times the broader market's 18.4% return. (A five-year stock chart is below so you can see the bigger picture.)
Here's what to watch in the company's upcoming Q2 report.
Image source: Getty Images.
Pool's key numbers
Here are Wall Street's estimates for the quarter and the company's year-ago results to use as benchmarks.
| Metric | Q2 2020 Result | Wall Street's Q2 2021 Consensus Estimate | Wall Street's Projected Change |
|---|---|---|---|
|
Revenue |
$1.28 billion |
$1.73 billion | 35% |
|
Adjusted earnings per share (EPS) |
$3.87 | $5.48 | 42% |
Data sources: Pool Corp. and Yahoo! Finance.
As the numbers above show, Wall Street expects robust year-over-year growth. I think the company has a good shot at exceeding these expectations, as the Street has been underestimating its growth prospects for some time. The global pandemic has accelerated the trend of consumers "nesting" at home. The company's business is heavily residential, as its commercial business accounts for only about 4% of sales, CEO Peter Arvan said on last quarter's earnings call.
For context, in the first quarter, the company's total sales surged 57% year over year to $1.06 billion, driven by 51% growth in base business. While sales growth in North America was strong, the company's smaller European business led the quarter, with 115% growth. ("Base business" is essentially organic revenue, though it excludes the effect of acquisitions for 15 months, rather than the more typical 12 months, probably because the company's business has significant seasonality.)
Net income according to generally accepted accounting principles (GAAP) skyrocketed 219% year over year to $98.7 million, which translated to EPS rising 223% to $2.42. Adjusted EPS (which excludes the impact of a $0.15 after-tax, noncash impairment charge in the year-ago period) soared 169% to $2.42, crushing the $1.15 analyst consensus estimate.
Cash flow growth was also robust, with cash from operations jumping 291% year over year to $77.1 million.
Moreover, last quarter, Pool Corp. also heftily increased its full-year 2021 earnings guidance. Investors were enthused with the brightened outlook and the better-than-anticipated Q1 results, sending shares up 6.4% on the day of the release.
Data by YCharts.
Guidance
Last quarter, management raised its full-year 2021 adjusted EPS guidance range to between $11.85 and $12.60, up about 30% at the midpoint from the prior range of $9.12 to $9.62. This outlook represents expected annual growth of 30% to 38%.
The market looks ahead, so its reaction to Pool Corp.'s Thursday earnings release will probably hinge more on any 2021 guidance change (if applicable) than on Q2 results.
