Pentair plc PNR reported adjusted earnings of $1.14 per share for the second quarter of 2026, beating the Zacks Consensus Estimate of $1.12 by 1.8% and also higher than the company’s expectation for the quarter. However, earnings declined 18% from $1.39 in the year-ago quarter.
Earlier this month, Pentair had stated that adjusted earnings per share (EPS) for the second quarter would be around $1.12, citing weaker-than-expected performance in its Pool business. This was attributed to a sharper-than-anticipated inventory correction by major channel partners, along with softer end-market demand amid elevated interest rates and persistent inflation.
Including one-time items, EPS was 80 cents compared with the prior-year quarter’s 90 cents.
Pentair plc Price, Consensus and EPS Surprise
Pentair plc price-consensus-eps-surprise-chart | Pentair plc Quote
Pentair’s Q2 Revenues Decline Y/Y on Pool Weakness
Revenues fell 17% year over year to $932.6 million and missed the consensus estimate of $1.012 billion by 7.9%. The figure also came in higher than Pentair’s stated expectation of $930 million for the quarter.
Core sales declined 17.3% as lower volume more than offset pricing and favorable currency movement. The shortfall primarily reflected an approximately $170 million inventory destock in the Pool channel.
Pentair Sees Contraction in Operating Margins in Q2
Cost of goods sold decreased 19.3% year over year to $537.6 million. Gross profit declined 13.5% to $395 million. However, gross margin expanded to 42.4% from 40.7%.
Selling, general and administrative expenses fell 4.2% to $204.8 million, while research and development spending decreased 5.6% to $23.7 million. Reported operating income dropped 23.5% to $166.5 million, and return on sales contracted 150 basis points to 17.9%.
On an adjusted basis, operating income declined 20% year over year to $237 million. That translated into adjusted return on sales of 25.4%, down 100 basis points from the year-ago quarter.
PNR's Flow and Water Solutions Offset Some Margin Pressure
Flow sales rose 5% year over year to $263.7 million, aided by acquisitions and currency, while core sales slipped 1%. Segment income increased 27% to $69.8 million, and return on sales expanded 470 basis points to 26.5%.
Water Solutions sales declined 5% to $422 million, with core sales down 3%. Segment income advanced 17% to $126.4 million, while return on sales improved 560 basis points to 30%, supported by productivity and price exceeding inflation.
Pentair's Pool Segment Bears the Brunt
Pool sales plunged 42% year over year to $246.6 million as channel partners rebalanced inventory across the product portfolio. The segment's core sales also declined 42%. Pool segment income fell 62% to $57.6 million, and return on sales dropped to 23.4% from 35.7%.
Pentair Generates Strong Cash and Returns Capital
Net cash provided by operating activities was $571.8 million compared with $606.6 million a year earlier. Free cash flow totaled $552.9 million compared with $595.8 million in the prior-year quarter.
Pentair ended the second quarter of 2026 with $91.8 million in cash and cash equivalents and $1.61 billion of long-term debt. The company repurchased $150 million of shares during the quarter. The company has $650 million available for share repurchases under its share repurchase authorization.
Pentair to Acquire Taco Group Holdings
Pentair also announced that it has entered into an agreement to acquire Taco Group Holdings, a leader in hydronic and water-based solutions, for approximately $1.4 billion, subject to customary adjustments. The acquisition will augment Pentair’s portfolio of smart, sustainable water solutions to support increased exposure to key high-growth end markets, primarily in North America.
The transaction is expected to close in the fourth quarter of 2026. The transaction is expected to boost Pentair’s 2027 EPS by 10 to 15 cents. Pentair expects to generate approximately $30 million in run-rate cost synergies related to supply chain and operational efficiencies.
PNR Initiates Q3 Outlook and Affirms Expectations for 2026
For the third quarter, management expects adjusted earnings of $1.05-$1.08 per share and sales to fall 4-6%.
Pentair reaffirmed the adjusted earnings guidance it had provided earlier this month, at $4.60-$4.80 per share for 2026. Full-year sales are projected to decline 4-7%, reflecting the Pool channel reset. The outlook excludes the acquisition of Taco Group Holdings.
Management described the Pool weakness as a temporary channel reset rather than a change in the business's long-term opportunity. Major channel partners reduced near-term orders to rebalance inventory and improve turns ahead of the 2027 pool season.
PNR Stock's Price Performance
Image Source: Zacks Investment Research
Pentair stock has declined 38.2% over the past year compared with the industry’s 11.1% decline.
Pentair’s Zacks Rank
Pentair currently carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
A Quick Look at How PNR’s Peers Fared in Q2
Pool Corp. POOL reported adjusted earnings of $5.38 per share, beating the Zacks Consensus Estimate of $5.30 per share. This marks a 4% increase from the earnings of $5.17 per share reported a year ago.
Pool Corp. posted revenues of $1,823 billion for the quarter, surpassing the Zacks Consensus Estimate of $1,819 million. The revenue figure marked a 2% year-over-year increase.
Xylem Inc. XYL reported adjusted EPS of $1.46, surpassing the Zacks Consensus Estimate of $1.34. The company reported earnings of $1.26 in the year-ago quarter.
Xylem reported revenues of $2,336 million in the quarter, beating the Zacks Consensus Estimate of $2,328 million. Revenues were up 1.5% year over year.
Pentair’s Peer Awaiting Results
Clean Harbors, Inc. CLH, scheduled to release second-quarter 2026 results tomorrow, has a trailing four-quarter negative average earnings surprise of 0.02%. The Zacks Consensus Estimate for Clean Harbors’ earnings for the quarter is pegged at $2.73 per share, implying year-over-year growth of 15.7%.
The consensus estimate for Clean Harbors’ top line is pegged at $1.62 billion, indicating a rise of 4.8% from the prior-year figure. Clean Harbors currently carries a Zacks Rank #2 (Buy).
Beyond Nvidia: AI's Second Wave Is Here
The AI revolution has already minted millionaires. But the stocks everyone knows about aren't likely to keep delivering the biggest profits. AI’s second wave is moving from infrastructure to implementation and these companies are at the forefront of this transition, positioned to become what Amazon and Google were to the internet era.
See Stocks Now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Pentair plc (PNR): Free Stock Analysis Report
Pool Corporation (POOL): Free Stock Analysis Report
Clean Harbors, Inc. (CLH): Free Stock Analysis Report
Xylem Inc. (XYL): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).