Pool downgraded at William Blair as high interest rates impede construction

[Above vertical view of people old senior couple taking hands with love and having fun on the blue clear swimming pool together enjoying the summer holiday vacation with trendy coloured lilos inflatable mattress]
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William Blair & Co. on Wednesday downgraded Pool Corp. (NASDAQ: NASDAQ:POOL [https://seekingalpha.com/symbol/POOL]) to Market Perform from a previous investment rating of Outperform, saying the swimming pool supply giant’s shares are likely to remain range-bound as elevated interest rates continue to suppress new pool construction and large renovation projects.

In Oct. 15 report, analysts led by Ryan Merkel wrote that while Pool’s (POOL [https://seekingalpha.com/symbol/POOL]) maintenance business -- roughly 65% of total sales -- remains stable and is expected to grow 2% next year, that momentum isn’t enough to offset weakness in new installations and remodels, which together make up 35% of revenue.

“The new pool market faces an affordability problem that requires lower rates to solve,” the analysts said, noting that Pool’s (POOL [https://seekingalpha.com/symbol/POOL]) shares have hovered near $320 since 2022 and are unlikely to break out until financing costs fall and construction demand revives.

INTEREST RATES, MACRO PRESSURES WEIGH ON OUTLOOK

William Blair forecasts 2025 earnings per share of $10.95, down slightly from $11.30 last year, with only modest improvement to $11.60 in 2026. Sales are projected to grow just 4% in 2026, insufficient to generate the operating leverage required for stronger EPS gains.

At the current share price near $295, Pool trades at about 18 times forward earnings before interest, taxes, depreciation and amortization, a premium to peers such as SiteOne Landscape Supply (SITE [https://seekingalpha.com/symbol/SITE]) at 15 times and Watsco (WSO [https://seekingalpha.com/symbol/WSO]) at 17 times. The firm cautioned that valuation could compress further if sales growth fails to accelerate toward the company’s long-term 6% to 9% algorithm.

STEADY MAINTENANCE, SOFTER CONSTRUCTION

While end-market trends have stabilized, William Blair noted that new construction permits remain weak and big-ticket consumer spending is under pressure. Equipment manufacturers have raised prices by 6% to 7%, which should help 2026 pricing, but not enough to drive meaningful near-term upside.

The analysts expect Pool’s (POOL [https://seekingalpha.com/symbol/POOL]) organic recovery to begin in the second half of 2026, assuming interest rates decline by about 100 basis points.

“Down cycles in the pool industry are historically followed by several years of robust sales growth from pent-up demand,” they wrote, but visibility into timing remains limited.

RISKS AND VALUATION

The firm cited risks from prolonged high interest rates, weather disruptions, insurance costs in Sunbelt states, and rising equipment prices that could further constrain affordability. At an enterprise value of $12.3 billion and an ROIC of 18%, the stock’s valuation “looks full” relative to its slower earnings trajectory.

William Blair said Pool’s fundamentals remain sound, but without a clearer catalyst — such as a housing rebound or rate cuts — “the risk/reward profile is balanced.”

The firm set a price target of $305 a share on Pool’s (POOL [https://seekingalpha.com/symbol/POOL]) stock.

MORE ON POOL

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* Pool Corporation (POOL) Q2 2025 Earnings Call Transcript [https://seekingalpha.com/article/4804075-pool-corporation-pool-q2-2025-earnings-call-transcript]
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