Pentair Reports Strong Fourth Quarter and Full Year 2023 Results

Fourth quarter 2023 earnings per diluted share from continuing operations (EPS) were $1.25 compared to $0.58 in the fourth quarter of 2022. On an adjusted basis, the Company reported EPS of $0.87 compared to $0.82 in the fourth quarter of 2022. Segment income, adjusted net income, free cash flow, and adjusted EPS are described in the attached schedules.

Fourth quarter 2023 operating income was $167 million, up 50 percent compared to operating income for the fourth quarter of 2022, and return on sales (ROS) was 17.0 percent, an increase of 590 basis points when compared to the fourth quarter of 2022. On an adjusted basis, the Company reported segment income of $198 million, up 8 percent for the fourth quarter of 2023 compared to segment income for the fourth quarter of 2022, and ROS was 20.1 percent, an increase of 190 basis points when compared to the fourth quarter of 2022.

Our strong results in 2023 reflected the power of our balanced and resilient water portfolio, our focused growth strategy, and solid execution from our relentless team, said John L. Stauch, Pentair’s President and Chief Executive Officer. Each of our three segments drove record margins in 2023. Our Transformation initiatives remain on track and have yielded strong margin expansion to continue to deliver shareholder value. In 2023, we generated significant free cash flow and continued to pay down debt, ending the year with an even stronger balance sheet. And, we raised our dividend for the 48th consecutive year which further solidified our status as a dividend aristocrat.

Full year 2023 sales were $4.1 billion. Sales were flat compared to sales last year. Excluding currency translation, acquisitions and divestitures, core sales declined 5 percent in 2023. Full year 2023 EPS from continuing operations was $3.75 compared to $2.92 in 2022. On an adjusted basis, the Company reported EPS of $3.75 compared to $3.68 in 2022.

Full year 2023 operating income was $739 million, up 24 percent compared to operating income in 2022, and ROS was 18.0 percent, an increase of 360 basis points when compared to 2022. On an adjusted basis, the Company reported segment income of $855 million, up 11 percent in 2023, compared to segment income in 2022, and ROS was 20.8 percent, an increase of 220 basis points when compared to 2022.

Flow (previously named Industrial and Flow Technologies) sales were up 1 percent in the fourth quarter of 2023 compared to sales for the same period last year. Excluding currency translation, acquisitions and divestitures, core sales declined 1 percent in the fourth quarter. Segment income of $65 million was flat compared to the fourth quarter of 2022, and ROS was 17.2 percent, a decrease of 20 basis points when compared to the fourth quarter of 2022.

Flow sales were up 5 percent for the full year of 2023 compared to sales for the same period last year. Excluding currency translation, acquisitions and divestitures, core sales grew 5 percent in 2023. Segment income of $282 million was up 17 percent compared to 2022, and ROS was 17.8 percent, an increase of 170 basis points when compared to 2022.

Water Solutions sales were down 5 percent in the fourth quarter of 2023 compared to sales for the same period last year. Excluding currency translation, acquisitions and divestitures, core sales declined 4 percent in the fourth quarter. Segment income of $52 million was up 15 percent compared to the fourth quarter of 2022, and ROS was 19.1 percent, an increase of 320 basis points when compared to the fourth quarter of 2022.

Water Solutions sales were up 19 percent for the full year of 2023 compared to sales for the same period last year. Excluding currency translation, acquisitions and divestitures, core sales grew 1 percent in 2023. Segment income of $248 million was up 66 percent compared to 2022, and ROS was 21.0 percent, an increase of 590 basis points when compared to 2022.

Pool sales were down 2 percent in the fourth quarter of 2023 compared to sales for the same period last year. Excluding currency translation, acquisitions and divestitures, core sales declined 2 percent in the fourth quarter. Segment income of $105 million was up 5 percent compared to the fourth quarter of 2022, and ROS was 31.3 percent, an increase of 220 basis points when compared to the fourth quarter of 2022.

Pool sales were down 18 percent for the full year of 2023 compared to sales for the same period last year. Excluding currency translation, acquisitions and divestitures, core sales declined 18 percent in 2023. Segment income of $417 million was down 10 percent compared to 2022, and ROS was 31.0 percent, an increase of 270 basis points when compared to 2022.

Full year net cash provided by operating activities of continuing operations was $621 million and free cash flow from continuing operations was $550 million.

Pentair paid a regular cash dividend of $0.22 per share in the fourth quarter of 2023. Pentair previously announced on December 11, 2023 that it will pay a regular quarterly cash dividend of $0.23 per share on February 2, 2024 to shareholders of record at the close of business on January 19, 2024. This dividend reflects a 5 percent increase in the Company’s regular cash dividend rate and marks the 48th consecutive year that Pentair has increased its dividend.

OUTLOOK

Mr. Stauch concluded, As we look to 2024, we are committed to driving growth, profitability and returns by focusing on our mission to help the world sustainably move, improve, and enjoy water, life’s most essential resource. We are investing in key areas to drive long-term growth and optimizing our sourcing and operational footprint which we expect to continue to drive further margin expansion in 2024 as these Transformation initiatives scale.

The Company is introducing 2024 GAAP EPS guidance of approximately $3.82 to $3.92 and on an adjusted basis of approximately $4.15 to $4.25, which includes a $0.07 negative impact, primarily driven by changes in global tax standards. This is an increase of 11 percent to 13 percent compared to 2023. The Company anticipates full year 2024 sales to increase 2 percent to 3 percent on a reported basis.

In addition, the Company introduces first quarter 2024 GAAP EPS of approximately $0.81 to $0.84 and on an adjusted EPS basis of approximately $0.88 to $0.91. The Company expects first quarter sales to be down approximately 2 percent to 3 percent on a reported basis compared to first quarter 2023.