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PENTAIR plc (PNR)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 delivered margin expansion and earnings growth despite flat revenue: sales $1.01B (-0.7% YoY), GAAP EPS $0.93 (+16% YoY), adjusted EPS $1.11 (+18% YoY), adjusted ROS 24.0% (+260 bps YoY) .
  • Broad-based beats vs consensus: Revenue $1.01B vs $0.989B*, adjusted EPS $1.11 vs $1.012*, EBITDA $256.1MM vs $242.3MM*; Pool led with +7% sales and 200 bps ROS expansion .
  • Guidance: FY25 GAAP EPS lowered to $4.27–$4.42 (from $4.37–$4.52) while FY25 adjusted EPS maintained at $4.65–$4.80; FY25 sales flat to +2% maintained; Q2 2025 introduced at GAAP EPS $1.24–$1.28 and adjusted EPS $1.31–$1.35 .
  • Management highlighted tariff mitigation (phased pricing, inventory pre-buys, order capping) and transformation savings; net tariff impact estimated at ~$140MM in 2025, split roughly one-third across segments, with pricing intended to offset volume softness .

What Went Well and What Went Wrong

What Went Well

  • 12th consecutive quarter of margin expansion; adjusted ROS reached 24.0% (+260 bps YoY) on transformation execution and 80/20 actions .
  • Pool segment strength: sales +7% YoY, core +4%, segment income +14%, ROS 32.8% (+200 bps YoY) .
  • Cash discipline and capital returns: $50MM buybacks; dividend increased for 49th straight year; free cash flow usage improved YoY (-$55.7MM vs -$126.9MM) .
    • Quote: “We delivered another strong quarter of earnings growth driven by continued execution and agility… inclusive of Transformation initiatives and 80/20 actions.” — CEO John Stauch .

What Went Wrong

  • Topline softness: total sales -0.7% YoY; Flow -4% (core -3%), Water Solutions -5% (core -4%), reflecting residential and ice headwinds; core company sales -0.8% .
  • Tariff uncertainty elevates price/volume trade-off: management expects higher pricing to be offset by lower volumes; residential housing tied to rates remains pressured .
  • Effective tax rate rose to 15.3% vs 13.0% YoY; GAAP EPS guidance lowered vs prior (GAAP) while adjusted EPS unchanged, indicating non-GAAP levers and cost actions carrying margin trajectory amid macro/tariff noise .

Financial Results

Consolidated Performance (Actuals: Oldest → Newest)

MetricQ3 2024Q4 2024Q1 2025
Revenue ($USD Millions)$993.4 $972.9 $1,010.4
GAAP Diluted EPS ($)$0.84 $0.99 $0.93
Adjusted Diluted EPS ($)$1.09 $1.08 $1.11
Gross Margin %39.6% 38.8% 39.9%
Operating Income ($MM)$179.9 $195.1 $203.1
Return on Sales % (ROS)18.1% 20.1% 20.1%
Adjusted Operating Income ($MM)$239.2 $231.3 $242.5
Adjusted ROS %24.1% 23.8% 24.0%

Q1 2025 vs Wall Street Consensus (S&P Global)

MetricActual Q1 2025Consensus Q1 2025
Revenue ($USD Millions)$1,010.4 $988.6*
Adjusted Diluted EPS ($)$1.11 $1.012*
EBITDA ($USD Millions)$256.1 $242.3*
Estimates count (EPS)—16*
Estimates count (Revenue)—16*
Values retrieved from S&P Global.*

Segment Breakdown (Actuals: Oldest → Newest)

SegmentNet Sales ($MM) Q3 2024Net Sales ($MM) Q4 2024Net Sales ($MM) Q1 2025Segment Income ($MM) Q3 2024Segment Income ($MM) Q4 2024Segment Income ($MM) Q1 2025ROS % Q3 2024ROS % Q4 2024ROS % Q1 2025
Flow$372.2 $360.7 $367.9 $82.8 $73.6 $83.6 22.2% 20.4% 22.7%
Water Solutions$289.5 $257.9 $258.2 $64.4 $62.2 $60.7 22.2% 24.1% 23.5%
Pool$331.4 $353.7 $383.9 $112.7 $119.4 $126.0 34.0% 33.8% 32.8%

KPIs (YoY Q1)

KPIQ1 2024Q1 2025
Net Cash from Ops ($MM)-$107.4 -$38.9
Free Cash Flow ($MM)-$126.9 -$55.7
Capital Expenditures ($MM)$19.3 $16.8
Net Interest Expense ($MM)$27.3 $19.7
Dividend per Share ($)$0.23 $0.25
Share Repurchases ($MM)$0 $50

Guidance Changes

MetricPeriodPrevious Guidance (Feb 4, 2025)Current Guidance (Apr 22, 2025)Change
GAAP EPSFY 2025$4.37–$4.52 $4.27–$4.42 Lowered
Adjusted EPSFY 2025$4.65–$4.80 $4.65–$4.80 Maintained
Sales (reported)FY 2025Flat to +2% Flat to +2% Maintained
Adjusted Operating IncomeFY 2025Up ~6%–9% Up ~6%–9% Maintained
GAAP EPSQ2 2025—$1.24–$1.28 Introduced
Adjusted EPSQ2 2025—$1.31–$1.35 Introduced
Sales (reported)Q2 2025—+1%–2% YoY Introduced
Dividend per Share2025$0.25 per quarter (announced Dec 16 and Feb 24) $0.25 per quarter (Aug 1 payment announced May 5) Maintained

Earnings Call Themes & Trends

TopicPrevious (Q3 2024)Previous (Q4 2024)Current (Q1 2025)Trend
Tariffs & PricingNo tariff focus; transformation driving margin; updated FY24 adjusted EPS Introduced FY25 EPS; resilient portfolio; rates pressuring residential ~$140MM net tariff impact; phased pricing (Apr/May/Jun) to offset, expect volume softness Elevated risk; proactive mitigation
Transformation SavingsOngoing execution; adjusted ROS +310 bps Record margins; multi-year transformation Target ~$80MM net savings FY25; pacing ahead in Q1 Continuing tailwind
Pool MarketCore +8% Q3; strong aftermarket Q4 Pool +5%; strong aftermarket Q1 Pool +7%; cautious on remodeling in H2 Solid but watch discretionary
Supply Chain & ChannelFCF strength; balanced capital allocation Strong FCF FY24; debt paydown Inventory pre-buys; order capping to prevent shadow inventory Tight management
China SourcingNot highlightedNot highlightedChina sourcing <~$100MM; reduced ~2.5x vs 3–4 yrs ago; some parts only sourced in China Diversification ongoing
Capital AllocationShare repurchases, dividend focus $150MM buybacks FY24; dividend +9% $50MM buybacks in Q1; balanced mix (debt, buybacks, M&A) Consistent discipline
Macro/HousingNoted macro challenges Residential pressure from rates Residential still pressured; pricing offsets volume Persistent headwind

Management Commentary

  • “We delivered another strong quarter of earnings growth driven by continued execution and agility… inclusive of Transformation initiatives and 80/20 actions.” — John Stauch, CEO .
  • “Sales, margin and adjusted earnings outperformed our expectations… ROS expanded 260 basis points to 24%.” — Robert Fishman, CFO .
  • “We are remaining agile in a rapidly changing environment… we feel comfortable maintaining our initial 2025 sales and adjusted 2025 EPS guidance with the current tariff index.” — John Stauch .
  • “The estimated tariff impact of roughly $140 million net of mitigation actions… split about 1/3 between Flow, Water Solutions and Pool.” — Robert Fishman .

Q&A Highlights

  • Price-volume trade-off: As prices rise with tariffs, management assumes softer volumes; pricing staged in Apr/May/Jun to offset impact .
  • Tariff impact and mix: ~$140MM net in-year 2025, predominantly China; benefits from inventory timing; mix helps margins; FX aids ~50 bps but minimal income impact .
  • Channel management: Order capping to prevent pre-buy distortions; phased pricing accepted as industry-wide response .
  • Pool outlook: New pool builds flat; potential remodeling softness in H2; leadership aims to upsell features despite macro .
  • Transformation cadence: ~$80MM FY25 savings evenly spread across Q2–Q4; Flow and Water Solutions primary contributors; Pool leverages growth .

Estimates Context

  • Q1 2025 beats vs consensus: Revenue $1.010B vs $0.989B*, adjusted EPS $1.11 vs $1.012*, EBITDA $256.1MM vs $242.3MM* .
  • FY25 consensus EPS $4.898* broadly aligns with company’s adjusted EPS guidance range ($4.65–$4.80), while GAAP EPS guidance reduced ($4.27–$4.42), implying more non-GAAP adjustments (restructuring, transformation, amortization) in 2025 .
    Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Quality of earnings strong: margin expansion and cost execution outpaced soft volumes; Pool remains the profit engine near term .
  • Tariff mitigation credible: phased pricing, inventory timing, sourcing diversification and 80/20 simplify product/customer mix; expect volume drag but margin resiliency .
  • Guidance intact on adjusted basis: FY25 adjusted EPS maintained; watch GAAP EPS reduction and tax rate drift (+230 bps YoY) for reported comparability .
  • Q2 setup: management expects +1–2% sales, margin expansion across segments, adjusted EPS $1.31–$1.35; monitor Pool seasonality and remodeling demand .
  • Capital returns consistent: dividend increase sustained (49 years) and $50MM buybacks; net debt/EBITDA low and ROIC ~16% positions for selective M&A .
  • Estimate revisions likely: consensus should move up modestly on Q1 beats and tariff clarity; Street may trim GAAP EPS while maintaining adjusted trajectory .
  • Trading lens: Stock likely reacts to demonstrated pricing power and margin durability vs tariff headlines; near-term catalysts include Q2 execution, Pool season trends and incremental tariff developments .