Pool Corp.’s third-quarter earnings came in at 35 cents per share, seven cents short of the Zacks Consensus Estimate. The company reported a 13% year-over-year drop in net sales to $430.1 million. New pool construction was down sharply, and the recession is forcing consumers to cut back on expenditures. Additionally, unfavorable weather continues to negatively impact the company’s earnings.

The stressed economic conditions with high levels of unemployment, foreclosures and a slowdown in the new housing construction market have severely impacted the company’s earnings in the past several quarters. We expect this trend to continue and believe consumers will keep postponing upgrades and delaying maintenance.

Additionally, Pool Corp’s business is susceptible to weather changes. While abnormally hot and dry conditions are generally favorable to the company’s operations, abnormally cool or rainy weather patterns can adversely impact sales. The latter was the case in several of the company’s key markets during 2008. Sales were also negatively impacted in the third quarter of 2009 due to unfavorable weather in the Central and Northern U.S. markets.

Nevertheless, Pool Corp. is unquestionably the leader in the industry. The potential for market growth is also significant and the cost containment initiatives augur well. We expect the company to benefit from pent-up demand once the economic environment improves. However, we believe that an increase in demand is needed to reap the full benefits of its expense reduction efforts.

Zacks Investment Research

(POOL) Analysts Move Pool Corporation to Underperform

The stressed economic conditions with high levels of unemployment, foreclosures and a slowdown in the new housing construction market have severely impacted the company’s earnings in the past several quarters. We expect this trend to continue and believe consumers will keep postponing upgrades and delaying maintenance. Also, the company’s business is susceptible to weather changes.

Nevertheless, the company is unquestionably the leader in the industry. The potential for market growth is also significant and the cost containment initiatives augur well. However, we believe that an increase in demand is needed to reap the full benefits of its expense reduction efforts.

Zacks Investment Research

(POOL) Pool Corporation – Bear of the Day

Results were below the Zacks Consensus Estimate of 42 cents. The company had earned 45 cents in the year-ago quarter. Results reflected a slowdown in construction activity and adverse weather conditions.

Pool Corp. also lowered its earnings guidance due to the adverse weather impact of the third quarter and a modest seasonal drag from the recent acquisition of General Pool & Spa Supply. The company now expects to earn 95 cents a share to $1 a share, excluding the LAC impairment charge and any other one-time charges, down from its previous guidance range of $1 to $1.05 a share.

During the quarter, the company reported a 13% year-over-year drop in net sales to $430.1 million. New pool construction is down sharply and the recession is forcing consumers to cut back on expenditures. Additionally, unfavorable weather in the Central and Northern U.S. markets negatively impacted the company’s earnings.

Gross profit was down 13% from the year-ago period to $123.4 million, though gross margin remained flat year-over-year at 28.7%. The company continued to experience negative pressures from the competitive pricing environment.

However, operating expenses decreased 12% from the year-ago period to $91.3 million due to cost containment measures. While operating income was down 17% from the prior year period to $32.1 million, operating margin decreased 30 basis points to 7.5%.

The company also managed to reduce debt levels by $103.3 million from the prior-year period. This resulted in a 45% decrease in interest expense.

Turning to the balance sheet, net receivables declined 16% from the prior-year period due to lower sales and a greater mix of cash-to-credit sales. Inventory levels decreased 8% year over year to $318.2 million at Sep 30, 2009. Day Sales Outstanding (DSO) for the quarter improved to 35.5 days, compared to 36.4 days in the prior-year period.

Management expects new pool construction to be down approximately 50% in the U.S. during 2009. However, the rate of decline in sales is moderating. We expect the company to benefit from pent-up demand once the economic environment improves. Though Pool Corp. is unquestionably the leader in the industry, we believe it will need an increase in demand to reap the full benefits of its expense reduction efforts. However, our concern remains about the rate of recovery, especially in the pool construction/major renovation business.

Zacks Investment Research
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(POOL) Pool Corporation Misses Forecast – Lowers Outlook

The transaction is expected to close in mid-October. Management expects this acquisition to be accretive in 2010 earnings and beyond.

Based in Northern California, General Pool & Spa manages 10 distribution sales centers and generates approximately $40 million in annual net sales. It is a well known and a reputed distributor in the industry and has an excellent customer servicing track record.

Pool, the world’s largest wholesale distributor of swimming pool supplies, equipment, and related products, posted earnings of 99 cents per share in the second quarter. The results were 9 cents above the Zacks Consensus Estimate.

Revenues for the swimming pool supply wholesaler fell 13% year over year as the company faces the toughest operating environment in its history. New pool construction is down sharply as the recession is forcing consumers to cut back on expenditures. The company was successful at implementing cost savings initiatives; however, selling, general, and administrative expenses were down 15% year over year. As a result, operating income fell only 9% versus the prior-year period.

The company also managed to reduce debt levels by $76 million and coupled with the impact of lower interest rates, interest expense fell 38%. We consider the results to be impressive given the challenging operating environment.

We expect that with the improvement in economic environment, Pool may benefit from pent-up demand. Additionally, such strategic acquisitions should benefit the company going forward.

Zacks Investment Research
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(POOL) Pool Corporation to Acquire General Pool & Spa Supply

Company Description

Sturm, Ruger manufactures firearms for the commercial sporting market which includes hunting, target shooting, collecting, self-defense, law enforcement, and government agencies. The company was founded in 1949 and has manufacturing facilities in New Hampshire and Arizona.

First Quarter Firearms Sales Surge 55.5%

On Apr 28, the company reported first-quarter results which surprised on analysts’ estimates by 25%, or 6 cents a share. Earnings per share were 30 cents compared to only 7 cents in the year ago period. The one covering analyst expected just 24 cents.

Sales climbed 49.4% to $63.5 million from $42.5 million in the first quarter of 2008. Ruger reported “unusually high” first quarter demand of 500,000 units. Firearm sales jumped 55.5% year over year and 8.7% from the fourth quarter of 2008. The company also launched a new product during the quarter, the LCR, which is the Lightweight, Compact Revolver.

As testament to popularity of the company’s products, backlog also soared to 458,900 units, or $136.3 million, at the end of the quarter from 175,900 units, or $47.8 million, at the end of the fourth quarter 2008.

Cash is King

Sturm, Ruger is in a rare position to be debt-free. The company had cash, cash-equivalents and short-term investments of $33.9 million at the end of the quarter.

Consensus Estimates Rise

Given the earnings surprise and the continued strong demand for the company’s products, the one covering analyst has sharply raised estimates for both the second quarter and the full year.

Second-quarter estimates rose 3 cents to 27 cents in the last 2 months.

2009 estimates jumped nearly 17% to $1.05 from 90 cents over the last 60 days.

Value Fundamentals

Sturm, Ruger is a Zacks #1 Rank (strong buy) stock. It has a forward P/E of 12.59 and a price-to-book of 2.99. The company has a solid 1-year return on equity (ROE) of 17.93%. As an added bonus, it also pays a dividend, with a current yield of 3.00%.

Zacks Investment Research
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(RGR) Sturm, Ruger & Company – Value – Zacks Rank Buy