Pentair Reports Strong Second Quarter 2023 Results
Image source: Pentair plc.
Second quarter 2023 earnings per diluted share from continuing operations (“EPS”) were $0.93 compared to $0.92 in the second quarter of 2022. On an adjusted basis, the company reported second quarter 2023 EPS of $1.03 compared to $1.02 in the second 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 water portfolio delivered another strong quarter with margin expansion across all three segments. Second quarter results exceeded our expectations resulting in an increase to our full year EPS guidance. Growth in our Industrial and Flow Technologies and Water Solutions segments more than offset expected volume declines in our Pool segment. Additionally, Transformation initiatives continued to drive greater efficiencies across all three segments through pricing and sourcing while cost actions to right-size for lower Pool volumes also contributed to expanded margin.”
“We remain confident that our strategy and resilient portfolio are driving sustainable growth, profitability and strong free cash flow. In the second quarter, we generated free cash flow of $433 million and significantly paid down debt. We are equally as excited about the Transformation initiatives that have taken hold this year with the compounding effects as each new wave within pricing, sourcing, operational excellence and organizational effectiveness is implemented. We are also encouraged by our innovation pipeline and 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.”
Second quarter 2023 operating income was $209 million, up 9 percent compared to operating income for the second quarter of 2022, and return on sales (“ROS”) was 19.3 percent, an increase of 140 basis points when compared to the second quarter of 2022. On an adjusted basis, the company reported segment income of $234 million for the second quarter of 2023, up 14 percent compared to segment income for the second quarter of 2022, and ROS was 21.6 percent, an increase of 230 basis points when compared to the second 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 9 percent in the second quarter. Segment income of $75 million was up 27 percent compared to the second quarter of 2022, and ROS was 18.2 percent, an increase of 250 basis points when compared to the second quarter of 2022.
Water Solutions sales were up 51 percent compared to sales for the same period last year. Excluding currency translation, acquisitions and divestitures, core sales grew 9 percent in the second quarter. Segment income of $75 million was up 130 percent compared to the second quarter of 2022, and ROS was 22.2 percent, an increase of 760 basis points when compared to the second quarter of 2022.
Pool sales were down 28 percent compared to sales for the same period last year. Excluding currency translation, acquisitions and divestitures, core sales declined 28 percent in the second quarter. Segment income of $105 million was down 23 percent compared to the second quarter of 2022, and ROS was 31.4 percent, an increase of 190 basis points when compared to the second quarter of 2022.
Net cash provided by operating activities of continuing operations was $447 million for the quarter compared to $308 million in the second quarter of 2022 and free cash flow provided by continuing operations for the quarter was $433 million compared to $288 million in the second quarter of 2022.
Pentair paid a regular cash dividend of $0.22 per share in the second quarter of 2023. Pentair previously announced on May 8, 2023 that it will pay a regular quarterly cash dividend of $0.22 per share on August 4, 2023 to shareholders of record at the close of business on July 21, 2023. This year marks the 47th consecutive year that Pentair has increased its dividend.
Outlook
Mr. Stauch concluded, “We are increasing our EPS guidance reflecting a strong first half of 2023 driven by the diversification of our smart, sustainable water business and long-term strategy while recognizing that we continue to operate in a challenging macroeconomic environment with higher interest rates and inflation. While we continue to expect 2023 to be a softer year for our Pool sales due to lower demand in new pools and channel inventory correction, we believe the power of our diversified portfolio demonstrates that we can drive sustained growth and profitability. We believe Pool remains a very attractive segment led by migration to sunbelt states, automation of existing pools and energy efficient and more sustainable product offerings. I would also like to add that we are very proud of our Pentair team who has demonstrated resilience and fortitude to continuously deliver for our customers and shareholders throughout very unusual operating conditions.”
The company increases its estimated 2023 GAAP EPS from continuing operations to approximately $3.27 to $3.37 and on an adjusted EPS basis to approximately $3.65 to $3.75. The company maintained 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 third quarter 2023 GAAP EPS from continuing operations guidance of approximately $0.77 to $0.82 and on an adjusted EPS basis of approximately $0.84 to $0.89. The company expects third quarter sales to be down approximately 7 percent on a reported basis compared to the third quarter of 2022.
Source: Pentair plc.
