Earnings for Q1 2023 were up 19% year over year and 9% organically.
Emphasized continued expected strength in many industries. This is surprising given that capital spending is expected to slow in 2023. Perhaps this is indicative of investment in water becoming a priority suggesting is not closely correlated to general capital for the near term future. However, it may be more easily explained by good customer selection by Evoqua.
Pentair announced 2022 revenue growth of 9% compared to 2021. The Industrial and Flow Technology segment led the way with 10% earnings growth, while the consumer segment only grew 4%.
Analysts dug into the pool segment given its the company's largest segment ($1.6B) and has a modest outlook for 2023. Despite being relatively resistant to recession in previous cycles (people maintain their pools even if no one is installing new ones and repair / replace is 75% of Pentair's revenue) in 2008 people leaving houses with underwater mortgages were clearly not maintaining those pools. Given the housing crisis was especially hard hitting in the sunbelt this impacted Pentair's earnings. However, in the next recession, caused by the pandemic, people were investing in their homes much to the benefit of the pool industry. It will be interesting to see the impact of extended high mortgage rates on the pool industry. If people are locked into their homes because they're unwilling to give up their 3% mortgage, maybe instead of getting a bigger house, they'll use their home equity to upgrade their existing home with a pool, This would set the industry on a period of extended growth.
Sales increased 16% after adding an 11th board member. The CEO, Scott Hall, remained relatively optimistic about demand and the spring construction season.
With the failure of the seven states in the Colorado River Basin to agree on consumption reductions (CA was the holdout), the federal government will need to step in.