On July 28, Pentair, the London-based water technology company, said second-quarter revenue fell 17% to $933 million as weak housing demand led to significant inventory correction in the U.S. pool channel, a development that knocked nearly 5% off the company's shares in premarket trading.
The company attributed the bulk of the quarter's revenue shortfall to destocking in its pool business. CEO John L. Stauch said the quarter's results came in below expectations, primarily due to a larger-than-anticipated inventory correction in the pool channel.
The pool segment, Pentair's most profitable of three verticals, supplies pumps, filters, heaters, automation systems and other equipment for residential and commercial swimming pools. Management estimated that about $170 million of the quarter's revenue decline was tied to inventory reductions in that channel.
Pentair reported adjusted earnings of $1.14 per share for the quarter, below the $1.20 analysts had expected, according to data compiled by LSEG. Despite the quarterly miss, the company maintained its full-year outlook. Pentair reaffirmed projected adjusted earnings of $4.60 to $4.80 per share and continued to expect a 4% to 7% decline in sales for the year.
In a strategic move to broaden its product set in hydronic and water-based systems, Pentair said it will acquire Taco Group Holdings for $1.40 billion. Upon closing, Taco is planned to be part of Pentair's Water Solutions reportable segment and is expected to continue going to market under the Taco brand.
The transaction is expected to close in the fourth quarter of this year. Pentair did not provide additional operational details about integration timelines beyond noting Taco's placement within the Water Solutions segment.
Market reaction to the earnings update reflected investor concern about the pool channel inventory correction, with shares trading lower in premarket activity. Management's reaffirmation of full-year guidance signals confidence in achieving its annual targets despite near-term headwinds from housing-related demand weakness.
Going forward, Pentair will navigate the effects of pool channel destocking while integrating Taco into its Water Solutions reporting structure once the deal closes later in the year.