Morningstar | No Real Surprises in Pentair’s 3Q Results; Maintaining Fair Value Estimate
We are modestly increasing our fair value estimate for narrow-moat Pentair to $45 from $44, primarily due to time value of money since our previous update, after the water service company announced third-quarter results. Pentair posted another solid quarter, as both revenue and earnings slightly beat consensus analyst expectations. Management’s outlook for the rest of 2018 remains upbeat, as the firm raised its EPS expectations upward about 1% from the prior guidance. Nothing in the latest earnings release alters our fundamental long-term view of the firm.The company grew core sales 6%, driven primarily by 12% year-over-year growth in aquatic systems, which continues to be the firm’s fastest growing segment. Filtration solutions sales grew 2% year over year, showing signs of stabilization after a 2% year-over-year decline in the prior quarter due to soft results in the food and beverage business.
Pentair implemented price increases across all three segments in September to help mitigate the impact of cost inflation. Management expects that productivity gains and incremental price increases will offset inflation, and we believe that the company’s narrow moat will allow it to withstand inflationary pressures.
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