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On Wednesday, JPMorgan analyst C. Stephen Tusa, Jr. adjusted the price target for Pentair (NYSE:PNR) to $106.00, down from the previous $110.00, while maintaining a Neutral rating on the stock. According to InvestingPro data, the stock currently trades at $98.26, with analyst targets ranging from $91 to $125. The revision comes as Pentair’s management updated their Return on Sales (ROS) target for 2026 to approximately 26%, which is close to the aspirational target discussed during the Investor Day in March 2024. This new target surpasses their initial base case ROS target of roughly 24%. The company maintains strong financial health, with an InvestingPro Overall Score of "GOOD."
Despite the improved margin outlook, Tusa noted concerns regarding revenue. Management anticipates a revenue decline of about 4% due to the implementation of 80/20 initiatives. Current revenue stands at $4.08 billion, with InvestingPro analysis showing five analysts have revised their earnings downward for the upcoming period. They also forecast a 1 percentage point headwind on the top line in the fourth quarter of 2024 and a similar impact in 2025. Tusa suggests that these estimates might be conservative and that the actual figures could be higher, leading to a shortfall of nearly $500 million in sales compared to prior expectations.
The analyst pointed out that this anticipated low single-digit (LSD) revenue growth in 2025 and 2026, following a 1% decline in 2024 versus mid single-digit (MSD) compounded growth, would likely result in earnings around $5.15 per share. This figure is below the consensus estimate of $5.38 and the $5.75 to $6.00+ range implied by previous guidance, which some investors might have expected based on growth at MSD and margins at the higher end of the 26% range.
Tusa acknowledged that Pentair’s focus on trading sales for margins could be a smart long-term strategy, but it presents a below-consensus earnings trend in the intermediate term. While Pentair shares have performed in line with the market and currently trade at a 13% discount compared to a historical 12% discount to the sector, the analyst emphasized that there appears to be risk to the 2026 consensus, leading to the reiteration of the Neutral rating.
In other recent news, CFRA analyst Jonathan Sakraida maintained a Hold rating on Pentair, with a steady price target of $105.00. Sakraida’s valuation is based on 20.3 times the projected earnings per share (EPS) for 2026, set at $5.16. Pentair’s Q4 EPS was reported at $1.08, showing a 23% year-over-year increase, surpassing the consensus estimate by $0.06. Despite a 1% year-over-year decline in net sales, the company’s margin growth across its portfolio was significant.
Pentair’s adjusted operating margins improved by 370 basis points in the fourth quarter, reaching 23.8%. This margin expansion played a key role in the company’s earnings growth, despite the overall sales dip. Looking ahead, Sakraida anticipates that Pentair’s revenues will remain relatively flat or experience a slight increase, with a continued emphasis on profitability expected to contribute to earnings expansion.
On the other hand, Pentair’s Q4 earnings fell short of analyst expectations, with an adjusted EPS of $1.08. The company’s full-year sales for 2024 were reported at $4.1 billion, a 0.5% decrease compared to 2023. The company provided guidance for 2025, expecting full-year adjusted earnings per share in the range of $4.65 to $4.80, below the consensus analyst estimate of $4.83. Despite these developments, Pentair maintained its dividend aristocrat status, increasing its dividend by approximately 9% for 2025.
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