Here's Why You Should Hold Pool Corp (POOL) Despite High Costs

·3-min read

Pool Corporation POOL is benefiting from robust base business, solid demand for non-discretionary maintenance and repair products, and strong renovation and remodel activity.

However, inflationary pressures are concerns. So far this year, shares of the company have gained 7.6% compared with the industry’s growth of 19.6%.

Let’s delve deeper.

Growth Drivers

Pool Corp generates the majority of its revenues from the Base Business, which excludes sales centers that are acquired, closed or opened in new markets for 15 months. In fourth-quarter 2022, revenues in the Base Business segment (contributed 95.4% to the total revenues) inched up 1.4% year over year to $1,045.2 million. The upside was primarily backed by a rise in chemical sales, greater adoption of higher-end features and technology, and the expansion of sales center network.

The company is also gaining from the opening of franchise locations. In first-quarter 2022, it acquired Pinch A Penny and boosted its presence in the DIY segment of the market. In 2022, POOL opened seven franchise locations.

In the fourth quarter of 2022, Pinch A Penny retail sales increased 17% year over year. The company stated that it initiated work on chemical sourcing and product management, which was reporting brisk store traffic and solid demand across the platform. Given the synergies, coupled with its robust development pipeline, POOL expects the initiative to drive growth in the upcoming period.

The Zacks Rank #3 (Hold) company benefits from the market-leading position that offers cost advantage and allows it to generate a higher return on investment than smaller companies. The housing market continues to boost demand for Pool Corp’s products despite numerous competitors and low barriers to entry.

Moreover, solid demand for swimming pool maintenance supplies, above-ground pools, spas, and automatic pool cleaners, heaters, pumps, lights, chemicals and filters continues to drive the company’s results. It is also witnessing healthy demand for construction materials and products.


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Pool Corp has been witnessing increased expenses lately. Notably, inflationary cost increases in the areas of labor, compensation, healthcare, freight and rent are leading to higher expenses.

In fourth-quarter 2022, the cost of sales was $780.2 million, up 9.4% from the prior-year quarter. Selling and administrative expenses increased 7.2% year over year to $208.4 million.

We believe that the company has to work hard toward cutting expenses to achieve high margins. For 2023, the company anticipates inflationary pressures to be 4-5%.

Key Picks

Some better-ranked stocks in the Zacks Consumer Discretionary sector are Las Vegas Sands Corp. LVS, Hilton Grand Vacations Inc. HGV and Crocs, Inc. CROX.

Las Vegas Sands sports a Zacks Rank #1 (Strong Buy) at present. LVS has a long-term earnings growth rate of 2.5%. The stock has gained 39.8% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for LVS’ 2023 sales and EPS indicates a rise of 108.4% and 217.5%, respectively, from the year-ago period’s reported levels.  
Hilton Grand Vacations currently sports a Zacks Rank #1. HGV has a trailing four-quarter earnings surprise of 12.1%, on average. Shares of HGV have declined 20.2% in the past year.

The Zacks Consensus Estimate for HGV’s 2023 sales and EPS indicates increases of 7.1% and 10.8%, respectively, from the year-ago period’s reported levels.

Crocs carries a Zacks Rank #2 (Buy) presently. The company has a trailing four-quarter earnings surprise of 21.8%, on average. Shares of Crocs have gained 49.4% in the past year.

The Zacks Consensus Estimate for CROX’s 2023 sales and EPS indicates increases of 12.5% and 2.5%, respectively, from the year-ago period’s reported levels.

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Pool Corporation (POOL) : Free Stock Analysis Report

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