Wilmington, NC –
By Scott Malone
BOSTON (Reuters) - Pentair Inc. on Tuesday cut its earnings outlook for the third and fourth quarters, sending its shares down as much as 10 percent, as weakness in the housing market took a toll on its swimming pool equipment business.
The diversified manufacturer, which also makes fluid-handling systems and industrial products, said it planned to take steps to cut costs. It will take a $17 million charge for severance costs and to increase reserves for accounts receivable.
Pentair also said Charles Brown had stepped down as president and chief operating officer of its Pump and Pool & Spa units.
Pentair, which also makes fluid-handling systems and industrial products, said it expected to report third-quarter earnings of 30 cents to 32 cents per share, including the charge of about 11 cents per share, down from its previous estimate of 46 cents to 50 cents.
Pentair also lowered its fourth-quarter forecast to between 33 cents and 35 cents a share from a previous range of 53 cents to 59 cents.
As a result, full-year earnings from continuing operations should come in at $1.72 to $1.76 a share, the company said. Analysts polled by Reuters Research were expecting $2.07.
"This adjustment reflects the effect of the housing slowdown on spa and bath markets and on new pool starts," said Chairman and Chief Executive Randall Hogan.
Morningstar analyst Matthew Warren said it appeared that the company had overloaded its distributors with inventory late last year, just as the housing market began to slow.
"It's just become clear how aggressively they were running the business," Warren said.
Still, he noted that since in addition to selling filters for new pools and spas, Pentair still has a strong replacement filter business.
"No one's filling in their pools because the housing market is slowing down," he added.
Golden Valley, Minnesota-based Pentair said it had not seen slowing demand outside its pool-related business, and it did not expect economic conditions to deteriorate in the fourth quarter or affect its commercial, industrial or municipal businesses.
Pentair shares were down $2.13, or 7.3 percent, at $26.96 in morning New York Stock Exchange trade after falling to $26.05, their lowest level since January 2004.
The stock is off 23.8 percent this year, compared with a 5.3 percent gain for the Standard & Poor's 1500 Capital Goods Industry Group Index. <.15GSPIC>
The company also named Michael Schrock to the new job of president and chief operating officer. He will continue to run the technical products group, which he has led since October 2001. Schrock reports to Hogan.
(Additional reporting by Christopher Kaufman in New York)