Pentair Reports Strong First Quarter 2023 Results
(Image source: Pentair plc.)
First quarter 2023 earnings per diluted share from continuing operations were $0.78 compared to $0.71 in the first quarter of 2022. On an adjusted basis, the company reported EPS of $0.91 compared to $0.85 in the first quarter of 2022. Segment income, adjusted net income, free cash flow and adjusted EPS are described in the attached schedules. John L. Stauch, Pentair’s President and Chief Executive Officer commented: “Our diversified portfolio delivered strong performance in the first quarter which exceeded our sales growth, margin expansion and EPS expectations. Transformation initiatives drove greater efficiencies across all three segments through pricing and sourcing while growth in Water Solutions and Industrial and Flow Technologies more than offset expected volume declines in Pool. Integration of our Manitowoc Ice acquisition remains on track and it has performed well with a strong backlog and accretive margins. We also published our Corporate Responsibility report last week highlighting progress towards our strategic targets.”
“We are confident that our resilient portfolio is driving balanced growth and we are excited about the long-term shareholder value we expect to create through our Transformation initiatives across all three segments, as evidenced by our Q1 adjusted margin expansion of 330 basis points versus the prior year period. We plan to continue to push innovation and reimagine how we can Make Better Essential through our products and solutions, for people and our planet by helping our customers move, improve and enjoy water.”
First quarter 2023 operating income was $184 million, up 26 percent compared to operating income for the first quarter of 2022, and return on sales was 17.8 percent, an increase of 320 basis points when compared to the first quarter of 2022. On an adjusted basis, the company reported segment income of $211 million for the first quarter of 2023, up 23 percent compared to segment income for the first quarter of 2022, and ROS was 20.5 percent, an increase of 330 basis points when compared to the first quarter of 2022.
Industrial & Flow Technologies sales were up 9 percent compared to sales for the same period last year. Excluding currency translation, acquisitions and divestitures, core sales grew 11 percent in the first quarter. Segment income of $65 million was up 25 percent compared to the first quarter of 2022, and ROS was 16.6 percent, an increase of 200 basis points when compared to the first quarter of 2022.
Water Solutions sales were up 32 percent compared to sales for the same period last year. Excluding currency translation, acquisitions and divestitures, core sales grew 2 percent in the first quarter. Segment income of $52 million was up 136 percent compared to the first quarter of 2022, and ROS was 19.3 percent, an increase of 850 basis points when compared to the first quarter of 2022. Pool sales were down 16 percent compared to sales for the same period last year. Excluding currency translation, acquisitions and divestitures, core sales declined 16 percent in the first quarter. Segment income of $116 million was unchanged compared to the first quarter of 2022, and ROS was 31.9 percent, an increase of 520 basis points when compared to the first quarter of 2022.
Net cash used for operating activities was $107 million compared to $132 million in the first quarter of 2022 and free cash flow used for the quarter was $123 million compared to $149 million in the first quarter of 2022. Pentair paid a regular cash dividend of $0.22 per share in the first quarter of 2023. Pentair previously announced on February 20, 2023 that it will pay a regular quarterly cash dividend of $0.22 per share on May 5, 2023 to shareholders of record at the close of business on April 21, 2023. This year marks the 47th consecutive year that Pentair has increased its dividend.
Outlook
Mr. Stauch concluded, “We continue to operate in a challenging macroeconomic environment, however, we have confidence in the diversification of our smart, sustainable water business and our long-term strategy. Our Manitowoc Ice acquisition continues to exceed our expectations, and we are pleased with our transformation progress. While we expect 2023 to be a softer year for our Pool sales due to economic uncertainty, lower demand in new pools and higher channel inventory, we believe Pool remains a very attractive segment led by migration to sunbelt states, automation of existing pools and energy efficient product offerings. We have great confidence in our global talent and company culture, and we have demonstrated experience navigating challenges. We believe we have the right purpose, the right team, the right portfolio, the right strategy and the right competitive advantages to win in this market. This is reflected in our second quarter and full year 2023 updated guidance.”
The company updates its estimated 2023 GAAP EPS from continuing operations to approximately $3.25 to $3.35 and on an adjusted EPS basis to approximately $3.60 to $3.70. The company updates full year 2023 sales guidance to be down approximately 2 percent to flat on a reported basis. The company expects full year free cash flow to approximate 100 percent of net income.
In addition, the company introduces second quarter 2023 GAAP EPS from continuing operations guidance of approximately $0.87 to $0.89 and on an adjusted EPS basis of approximately $0.94 to $0.96. The company expects second quarter sales to be down approximately 1 percent to flat on a reported basis compared to the second quarter of 2022.
Source: Pentair plc.
