Shares of swimming pool supply company Pool Corporation (POOL 1.32%) jumped higher on Thursday after the company reported financial results for the second quarter of 2024. As of noon ET, Pool stock was up about 10%.
Diving into Pool's numbers
So Pool's Q2 results were good, right? Well, that's overly simplistic. In fact, many of the company's metrics are down. The Q2 net sales of $1.8 billion were down 5% year over year, its profit margins went down, and its earnings per share (EPS) dropped 16% to $4.99. None of this looks good without context.
Pool's management keeps updating its guidance for 2024. It most recently gave an update on June 24, saying net sales in the first half of 2024 would be down about 6.5% and that it would have full-year EPS of $11.04-$11.44. But in its Q2 report today, its net sales were better than expected considering they fell only 5.7% in the first half of the year.
Pool's profit margins are down, which isn't good. Specifically, its Q2 operating margin of 15.3% was down from an operating margin of 17.6% in the same quarter last year. But management added a penny to its full-year EPS guidance, so there's a little encouragement on the bottom line.
Is Pool going to be OK?
Pool sells products needed for pool construction and pool maintenance. When it comes to maintenance, things are fine -- demand is steady, and modestly higher supply prices are boosting sales. But new pool construction and renovations are both way down, and this is dragging down the company's overall results.
I believe Pool can be a great stock for long-term investors. There will sometimes be low demand. But people with swimming pools usually spend for maintenance, giving the company a predictable profit stream. Management regularly reduces its share count, and it pays a growing dividend with its profits, which are boosters of long-term shareholder returns.
POOL Average Diluted Shares Outstanding (Quarterly) data by YCharts
Pool stock might get cheaper in the near term. But about twice this year's sales isn't a bad price for this stock that's performed really well over the last 10 years.
