Executive Summary

Q3 2025 delivered sales of $1.022B (+2.9% reported, +3.3% core), adjusted EPS $1.24 (+14% YoY), and adjusted ROS 25.7% (+160 bps), with a clean beat vs Street on revenue and adjusted EPS; consensus was ~$1.005B revenue and ~$1.18 EPS.*
Guidance raised: FY25 adjusted EPS to $4.85–$4.90 (from $4.75–$4.85) and GAAP EPS to $3.98–$4.03; FY25 sales to ~+2% reported (from +1–2%). Q4 guide introduced at GAAP EPS $1.03–$1.08 and adjusted EPS $1.11–$1.16 with reported sales +3–4%.
Segment mix: Flow +6% sales (ROS +200 bps to 24.2%), Pool +7% sales (ROS 32.8%, -120 bps on tough comp and growth investments), Water Solutions -6% sales (ROS +280 bps to 25.0%).
Catalysts: Transformation savings (~$80M FY25 target) underpin margin expansion; Hydra-Stop acquisition adds ~$10M to Q4 Flow at ~30% ROS and ~$50M run-rate in 2026. Management flagged tariff mitigation, pool pricing stability, and increased 2025 sales/EPS outlook.

What Went Well and What Went Wrong

What Went Well

Strong beat and margin execution: “record third quarter across adjusted operating income, return on sales, and adjusted EPS… ROS expanded 160 bps to 25.7%.”
Flow strength broad-based: Residential +3%, Commercial +5% (13th consecutive YoY growth), Industrial +10%; ROS +200 bps to ~24%.
Transformation savings and FCF: YTD free cash flow a record $719M; transformation tracking to ~$80M FY25 net of investment.

What Went Wrong

Water Solutions revenue softness: -6% reported; core flat. Commercial impacted by sale of commercial services in Q2; residential pressured by portfolio exits.
Pool margin compression vs tough comp: ROS 32.8% (-120 bps YoY) as the company invested in growth (sales plays, digital, NPI), with expectation to re-expand in Q4.
Tariff uncertainty persists: Total 2025 impact ~$75M; management maintaining mitigation strategies, with potential incremental China/Mexico actions if needed.

Financial Results

Metric	Q3 2024	Q2 2025	Q3 2025
Revenue ($USD Millions)	$993.4	$1,123.1	$1,022.0
GAAP Diluted EPS ($)	$0.84	$0.90	$1.12
Adjusted Diluted EPS ($)	$1.09	$1.39	$1.24
Operating Income ($USD Millions)	$179.9	$217.7	$231.7
Return on Sales (ROS, %)	18.1%	19.4%	22.7%
Adjusted Operating Income ($USD Millions)	$239.2	$296.7	$262.6
Adjusted ROS (%)	24.1%	26.4%	25.7%
Gross Margin (%)	39.6%	40.7%	41.0%
SG&A (% of Net Sales)	19.2%	19.0%	15.9%
Effective Tax Rate (%)	12.9%	13.9%	15.0%

Segment	Q3 2024 Net Sales ($MM)	Q2 2025 Net Sales ($MM)	Q3 2025 Net Sales ($MM)	Q3 2024 ROS (%)	Q2 2025 ROS (%)	Q3 2025 ROS (%)
Flow	$372.2	$397.3	$394.0	22.2%	23.4%	24.2%
Water Solutions	$289.5	$298.3	$273.3	22.2%	23.5%	25.0%
Pool	$331.4	$427.2	$354.3	34.0%	35.7%	32.8%

KPI	Q3 2024	Q2 2025	Q3 2025
Operating Cash Flow ($MM)	$248.6	$606.6	$196.3
Free Cash Flow ($MM)	$233.6	$595.8	$178.9
Net Interest Expense ($MM)	$19.8	$17.9	$14.4

Actual vs. Street (Consensus – S&P Global)

Metric	Q3 2025 Consensus*	Q3 2025 Actual
Revenue ($USD Millions)	$1,005.3*	$1,022.0
Adjusted EPS ($)	$1.18*	$1.24
Note: Values with asterisk retrieved from S&P Global.*

Non-GAAP adjustments (selected): Q3 2025 adjusted EPS adds $0.12 from adjustments; adjusted operating income excludes restructuring/other, transformation costs, intangible amortization, asset impairments, deal costs, and includes equity income.

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
GAAP EPS	FY 2025	$3.95–$4.05	$3.98–$4.03	Maintained (tightened upper)
Adjusted EPS	FY 2025	$4.75–$4.85	$4.85–$4.90	Raised
Sales (Reported)	FY 2025	+1–2%	~+2%	Slightly raised
GAAP EPS	Q4 2025	N/A	$1.03–$1.08	Introduced
Adjusted EPS	Q4 2025	N/A	$1.11–$1.16	Introduced
Sales (Reported)	Q4 2025	N/A	+3–4%	Introduced
Flow sales	Q4 2025	N/A	High single digits; includes ~$10M Hydra-Stop at ~30% ROS	Introduced
Water Solutions	Q4 2025	N/A	Down mid-single digits; core ~flat (commercial services sale impact)	Introduced
Pool sales	Q4 2025	N/A	Up mid-single digits	Introduced
Dividend	Quarterly	$0.25 per share (49th consecutive annual increase)	$0.25 per share (paid Nov. 7 on record Oct. 24)	Maintained

Earnings Call Themes & Trends

Topic	Previous Mentions (Q1 2025)	Previous Mentions (Q2 2025)	Current Period (Q3 2025)	Trend
Tariffs/Mitigation	Implemented price increases; pre-bought inventory; capped orders to manage supply chain	“Navigated tariff and economic uncertainty”	2025 tariff impact ~$75M; mitigation in place; incremental China/Mexico potential immaterial for FY25	Stable mitigation; uncertainty persists
Transformation Savings	Ongoing; ROS up 260 bps; adjusted ROS 24.0%	Adjusted ROS +170 bps to 26.4%	~$80M FY25 savings target; flywheel from 80/20 driving margins	Accretive, sustained
Pool Pricing/Margins	Core sales +4%; ROS 32.8%	Core +7%; ROS 35.7% (+160 bps)	Core +6%; ROS 32.8% (-120 bps on tough comp); price holding; Q4 margin re-expansion expected	Near-term investment; margins re-expand
Water Solutions Demand	Core -4%; ROS +310 bps	Core -3%; ROS flat; commercial softness	Reported -6%; core flat; commercial and international softness (China)	Soft topline; margin discipline
Flow Expansion	Core -3% in Q1	Flat; core -1%	+6% sales; resi +3%, commercial +5%, industrial +10%; ROS +200 bps	Strengthening
Digital/AI Initiatives	Not highlighted	Not highlighted	Elevated CIO role; focus on digital front-ends, dealer experiences; AI-enabled strategies	Building capabilities
M&A: Hydra-Stop	Agreement announced Aug. 18	N/A	Closed; ~$10M Q4 at ~30% ROS; ~$50M FY26 baseline	Accretive adjacency

Management Commentary

“We delivered strong third quarter results… sales growth and double-digit earnings growth… Transformation initiatives… continue to grow profitability long-term.” — CEO John Stauch
“Flow had an amazing quarter… allowed us to invest in other businesses… expect Pool margins to expand in Q4.” — CFO Bob Fishman
“We continue to execute well… offsetting the impact of tariffs… total 2025 tariff impact of approximately $75 million… we expect to take mitigating actions as needed.” — CFO
“We are excited to welcome the Hydra-Stop team… $10M in Q4 sales at ~30% ROS… ~$50M FY26 is a good baseline.” — CFO

Q&A Highlights

Pool margin and pricing: Management reiterated pricing is holding; Q3 margin compression due to deliberate growth investment and tough comp; expect Q4 re-expansion. Early buy season “normal,” with revenues split ~50% Q4/~50% Q1.
Water Solutions: Core growth tweaked down; commercial water tracking low single digits; international softness (China) offset by North America stability; filtration marked 18th consecutive quarter of growth.
Flow drivers: Industrial strength (food & beverage, sustainable gas), diversified customer base (specification wins across building types, incl. data centers).
Tariffs/competition: ~$75M 2025 tariff impact; mitigation in place; some low-cost entrants in commodity products; company focusing on value, quality, and service to defend share.
Capital deployment and digital: Balanced approach across M&A, buybacks, dividends; elevated CIO to accelerate digital front-ends and AI-enabled experiences for dealers/distributors.

Estimates Context

Q3 2025 beat: Revenue $1,022.0M vs consensus ~$1,005.3M*; Adjusted EPS $1.24 vs consensus ~$1.18* (consistent with raised FY outlook).
Q4 2025 consensus: Revenue ~$1,007.1M*, EPS ~$1.16* vs company guide GAAP $1.03–$1.08 and adjusted $1.11–$1.16 (guide bracket aligns with consensus).*
FY 2025 consensus: EPS ~4.90*, revenue ~$4.163B*, broadly aligned with raised company guidance (adjusted EPS $4.85–$4.90; sales ~+2%).
Note: Values with asterisk retrieved from S&P Global.*

Key Takeaways for Investors

Quality beat with margin expansion: Adjusted ROS +160 bps and adjusted EPS +14% YoY; continued transformation savings support sustainability of margins.
Flow momentum durable: Broad-based growth with industrial strength; specification strategy driving wins; near-term uplift from Hydra-Stop.
Pool thesis intact: Pricing stable and volume improving; Q3 margin dip from intentional growth investment should re-expand in Q4 per management.
Water Solutions stable margins amid topline softness: Core flat with commercial/international headwinds; focus on optimization and bottom-line protection.
FY25 risk management: Tariffs (~$75M) mitigated; management maintains pricing and supply chain agility; guide raised despite macro uncertainty.
Cash returns and balance sheet: Record YTD FCF ($719M), leverage ~1.3x, ROIC ~16.7%, continued buybacks and dividend framework.
Near-term setup: Q4 guide implies continued sales growth and margin expansion; Street largely aligned on FY EPS; watch tariff developments and Pool early-buy trajectory for upside/downside skew.

PENTAIR plc (PNR)·Q3 2025 Earnings Summary