Pentair Q2 Earnings Call Highlights

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Pentair (NYSE:PNR) reported second-quarter results that were slightly above the company’s July 14 pre-announcement, as strong profitability in its Flow and Water Solutions segments was offset by a sharp sales decline in Pool tied primarily to channel inventory reductions.

The company also announced an agreement to acquire Taco Group Holdings for $1.4 billion, a transaction expected to broaden Pentair’s Water Solutions business in hydronic, HVAC, commercial and infrastructure markets. The acquisition is expected to close in the fourth quarter, subject to customary adjustments and conditions.

Second-Quarter Results Reflect Pool Inventory Reset

Pentair reported second-quarter sales of $933 million, adjusted operating income of $237 million, adjusted return on sales of 25.4% and adjusted earnings per share of $1.14. Core sales declined 17% from a year earlier, driven primarily by a $170 million reduction in Pool channel inventory.

Chief Executive Officer John Stauch said the Pool business was the source of the quarter’s underperformance, while Flow and Water Solutions produced record return on sales even excluding tariff refunds.

“Our underperformance was concentrated in Pool,” Stauch said. “The Flow and Water Solutions businesses delivered record return on sales, even when excluding the benefit of tariff refunds.”

Second-quarter adjusted operating income included about $35 million in tariff refunds across Pentair’s three reporting segments. The company said lower Pool volume and inflation were partly offset by pricing, $14 million in productivity savings and the tariff refunds.

• Flow: Sales rose 5% to $264 million, aided by the Hydra-Stop acquisition. Segment income increased 27%, while return on sales rose 470 basis points to 26.5%.
• Water Solutions: Sales declined 5% to $422 million, including the impact of the prior-year sale of a commercial service business. Segment income increased 17% to $126 million and return on sales rose 560 basis points to 30%.
• Pool: Sales fell 42% to $247 million and segment income declined 62% to $58 million. Pool return on sales fell to 23.4% from 35.7% a year earlier.

Water Solutions included $18 million of tariff refunds during the quarter, its largest such benefit among the company’s segments. Pentair said its professional channel continued to grow in Water Solutions, supported by focus on top customers and a combined residential pump and filtration offering.

Pool Actions Target 2027 Recovery

Stauch said the Pool sales decline resulted largely from a broader-than-expected inventory realignment among major channel partners. The company expects inventory levels to be optimized by the end of the third quarter, positioning the segment for the 2027 Pool season.

Management also cited moderating dealer sell-through amid pressure on discretionary North American residential end markets, as well as modest share losses in replacement equipment for pools installed 10 to 15 years ago.

Pentair’s response includes regional alignment of sales and marketing, changes to incentives, a dealer-focused segmented sales process, investments in customer-led innovation and efforts to improve awareness of like-for-like replacement products. Stauch said some past business decisions involving smaller distributors, buying groups and independent dealers had disrupted relationships and contributed to aftermarket share losses.

“We made some decisions that need to be reversed,” Stauch said, adding that Pentair is working to reestablish those relationships.

Interim Chief Financial Officer Bob Fishman said Pool sales for 2026 could be about $1.25 billion based on the company’s guidance. He described approximately $1.45 billion as a potential 2027 starting point as the inventory effect reverses, though he said conditions still need to develop through the upcoming season. Management said it expects Pool margins in 2027 to begin with a “three” rather than a “two,” while the company reinvests to restore growth.

Taco Acquisition Expands Water Solutions

Pentair said Taco is a market-leading provider of circulator pumps, valves, tanks, heat exchangers, fabricated solutions and controls for commercial, industrial and residential applications. Taco has an installed base of roughly 40 million units and approximately 85% of its revenue is associated with replacement products, maintenance and system upgrades, according to Pentair.

The acquisition will expand Pentair’s exposure to HVAC, energy efficiency, comfort cooling, data centers and related infrastructure. Taco’s data-center business represents approximately 15% of its commercial and industrial revenue, Pentair said. Taco also has a strong presence in multifamily residential markets and sells primarily through manufacturer representatives, creating potential cross-selling opportunities with Pentair’s distribution channels.

The $1.4 billion purchase price equates to approximately 10.5 times expected 2026 adjusted EBITDA when estimated tax benefits and run-rate cost synergies are included, according to Pentair. The company expects about $30 million in run-rate cost synergies over two to three years, primarily from purchasing power and scale, while operating Taco as a standalone business unit within Water Solutions.

Pentair expects the deal to add approximately $0.10 to $0.15 to adjusted EPS in fiscal 2027. It plans to fund the transaction with cash and committed bridge financing, later refinanced with permanent debt. Net leverage is expected to rise to about 2.4 times at closing before falling below 1.5 times within two years.

Outlook Reaffirmed

Pentair reaffirmed its full-year adjusted EPS outlook of $4.60 to $4.80 and said its guidance excludes the Taco acquisition. The company expects 2026 sales to decline approximately 4% to 7%, or to reach a midpoint of about $3.95 billion.

For the full year, Pentair expects Flow sales to rise by mid- to high-single digits, Water Solutions sales to be roughly flat with low-single-digit core growth, and Pool sales to decline 18% to 22%.

For the third quarter, Pentair forecast sales down 4% to 6%, with Flow sales up high single digits and Water Solutions sales up low single digits. Pool sales are expected to fall 23% to 25% as the company continues to reduce channel inventory. Pentair projected third-quarter adjusted EPS of $1.50 to $1.80.

The company repurchased $150 million of shares during the second quarter. It also noted that it raised its dividend by 8% earlier this year, marking its 50th consecutive annual dividend increase.

About Pentair (NYSE:PNR)

Pentair plc (NYSE: PNR) is a global provider of water treatment and fluid management solutions. The company designs, manufactures and sells a broad range of products that move, treat, monitor and control the flow of water and other fluids across residential, commercial, industrial and municipal markets. Pentair's offerings are focused on improving water quality, conserving resources and enabling efficient fluid handling in applications from household water systems and pools to large-scale industrial and municipal installations.

Product lines include pumps and pumping systems, water filtration and purification equipment, valves and controls, heat exchangers, pool and spa systems, and a range of aftermarket parts and services.

This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected].

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