Pool Corp. (POOL -0.68%), which touts that it's "the world's largest wholesale distributor of swimming pool and related outdoor living products," is slated to report its second-quarter 2022 results before the market open on Thursday, July 21. An analyst conference call is scheduled to follow at 11 a.m. ET.

Investors will probably be approaching the upcoming report with a mix of optimism and caution.

Curvy inground pool in backyard with some planters with flowers and furniture on adjacent patio.

Image source: Getty Images.

The reasons for optimism include the company's surpassing Wall Street's consensus earnings estimate in at least the last eight quarters, with most of these beats anywhere from fairly sizable to downright large. In the most recent two quarters, for instance, the company exceeded analysts' earnings expectation by 41% (fourth quarter of 2021) and 40% (first quarter of 2022).

Pool Corp., whose business is primarily residential, has long been benefiting from the longer-term trend of people "nesting" at home. The pandemic accelerated the trend of people spending money on their indoor and outdoor living spaces. So, unlike many companies in the consumer-discretionary sector, Pool Corp.'s business got a boost from the global crisis.

The company kicked off 2022 on a strong note. Along with turning in robust first-quarter results, management also raised its full-year earnings guidance.

That said, the macroeconomic environment is challenging. So far, the company's business continues to perform well, despite persisting inflationary pressures and pandemic-driven supply chain constraints. However, if recessionary concerns ramp up, the company could feel the effect of consumers cutting back on discretionary spending.

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 2021 Result Wall Street's Q2 2022 Consensus Estimate Wall Street's Projected Change (YOY)
Revenue $1.79 billion $2.14 billion 20%
Adjusted earnings per share $6.37 $7.54 18%

Data sources: Pool Corp. and Yahoo! Finance. YOY = year over year.

For context, in the first quarter, the company's total sales surged 33% year over year to $1.41 billion, driven by 26% growth in base business. ("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.) 

The top line got a boost of about 10% to 12% from inflation-driven higher prices. It also got an estimated 5% benefit from a pull forward of customer early buys. In other words, these purchases would have normally occurred in the second quarter. Many companies have been stocking up on more inventory than usual because of supply chain issues.

In the first quarter, net income soared 82% year over year to $179.3 million, which translated to earnings per share (EPS) increasing 82% to $4.41. This result sped by the $3.15 analysts had projected.

But operating cash flow moved in the wrong direction, and investors will want to monitor this metric. Last quarter, the company used cash of $208.1 million running its operation, whereas it generated cash of $77.1 million in the year-ago period. It attributed this decline in part to increased inventory purchases and other working-capital changes stemming from its sales growth and recent acquisitions. In addition, a federal tax payment of $79.5 million that was deferred from last year also affected cash flow.

Guidance

A notable change in guidance would likely move the stock. 

Last quarter, management raised its full-year 2022 adjusted EPS guidance range to between $18.34 and $19.09, up from $17.19 to $17.94. The outlook represents expected annual growth of 15% to 20%.