Pentair targets $4.85–$4.90 adjusted EPS for 2025 as transformation accelerates and guidance rises

Earnings Call Insights: Pentair plc (PNR) Q3 2025

MANAGEMENT VIEW

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John Stauch, President and CEO, reported "sales growth and a record third quarter across adjusted operating income, return on sales and adjusted EPS." He stated, "Sales increased 3%, driven by our Pool and Flow segments. Adjusted operating income increased 10%. ROS expanded 160 basis points to 25.7% and adjusted EPS rose 14% to $1.24." Stauch highlighted the acquisition of Hydra-Stop for approximately $292 million, which enhances the commercial flow business and brings "a strong financial profile and strategic fit." He also announced a raise in full year guidance, now expecting "sales growth of approximately 2% and adjusted EPS of approximately $4.85 to $4.90, up 12% to 13% from 2024." Stauch emphasized ongoing transformation initiatives, stating, "We have delivered approximately $56 million in transformation savings year-to-date and are on track to reach approximately $80 million in 2025." Operational efficiency, balanced capital deployment, and continued share repurchases were also underscored.

*
Robert Fishman, Executive VP & CFO, announced his planned departure effective March 1, 2026, and described the company as "expected to exit the year with continued momentum and is poised for significant success going forward." Fishman detailed that in Q3 Pentair achieved "sales of $1.022 billion, up 3% adjusted operating income of $263 million, up 10% ROS of 25.7%, an increase of 160 basis points and adjusted EPS of $1.24, up 14%." He attributed margin expansion to transformation efforts and price offsetting inflation, and highlighted record free cash flow of $719 million year-to-date, a leverage ratio of 1.3x, and share repurchases of $175 million.

OUTLOOK

* Full year adjusted EPS guidance was increased to approximately $4.85 to $4.90, up 12% to 13% year-over-year. Sales guidance was raised to up approximately 2%. Flow sales are expected to be up low single digits, Water Solutions down mid-single digits with core sales down approximately low single digits, and Pool sales up approximately 7%. Adjusted operating income is expected to increase approximately 9% to 10%. Transformation savings are projected to reach approximately $80 million this year, net of investments. For Q4, sales are expected to be up 3% to 4%, with Flow up high single digits (including a $10 million sales contribution from Hydra-Stop), Water Solutions down mid-single digits, Pool up mid-single digits, and adjusted operating income up 4% to 8%. Fourth quarter adjusted EPS guidance is $1.11 to $1.16.

FINANCIAL RESULTS

* Q3 sales totaled $1.022 billion. Adjusted operating income reached $263 million. ROS was 25.7%. Adjusted EPS was $1.24. Flow sales were $394 million, up 6% year-over-year; residential up 3%, commercial up 5%, industrial up 10%. Segment income for Flow grew 15%. Water Solutions sales declined 6% to $273 million, while segment income grew 6%. Pool sales increased 7% to $354 million, with segment income of $116 million. Record free cash flow of $719 million was generated year-to-date. Return on invested capital increased to 16.7%. Net debt leverage ratio was 1.3x. Year-to-date, $175 million of shares were repurchased.

Q&A

* C. Stephen Tusa, JPMorgan: Asked about Pool segment margin trends and volume outlook. Robert Fishman indicated continued progress toward $80 million in transformation savings and expressed optimism for Pool margin rebound in Q4. Fishman noted, "We started off the year very strong from a transformation perspective, drove over half of our savings. So we could afford to invest in Q3, especially in Pool." John Stauch added, "We're highly encouraged that we're going to have a volume-based growth plan for Pool next year and prices are holding."
* Andrew Kaplowitz, Citigroup: Inquired about Water Solutions’ lowered growth outlook and 2026 targets. Fishman clarified, "It was the only full year guide we tweaked down a little bit in terms of core Water Solutions...it's a slower market right now." Stauch confirmed continued strength in North America despite international softness and emphasized confidence in hitting 26% ROS in 2026.
* Deane Dray, RBC: Sought details on transformation savings. Fishman explained transformation savings are "balanced across the 4 pillars" and detailed ongoing productivity and sourcing initiatives.
* Damian Karas, UBS: Asked about Flow segment pricing and industrial performance. Fishman stated, "We're seeing price reading out across all 3 of those businesses... pleased with both our food and beverage and sustainable gas businesses."
* Additional analysts probed on pricing carryover, tariffs, digital investments, inventory, and capital allocation, with management emphasizing discipline, digital enablement, and balanced capital deployment.

SENTIMENT ANALYSIS

* Analysts predominantly expressed constructive but probing sentiment, focusing on the sustainability of margin gains, pricing power, and transformation progress. Multiple congratulations were extended to CFO Robert Fishman on his announced departure.
* Management’s tone was confident in the prepared remarks. During Q&A, the tone remained assured with moments of caution, especially regarding market headwinds and tariff uncertainties. Stauch stated, "We feel comfortable with where we are," and Fishman reiterated commitment to transformation savings.
* Compared to the previous quarter, analyst tone shifted from cautious optimism to more focus on sustainability and competitive threats. Management’s confidence persisted, supported by tangible financial improvements and strategic clarity.

QUARTER-OVER-QUARTER COMPARISON

* Guidance for both adjusted EPS and sales was raised compared to the previous quarter, with full year adjusted EPS now at $4.85 to $4.90 versus the prior range of $4.75 to $4.85. Sales growth guidance increased from 1%–2% to approximately 2%. Transformation savings targets held steady at $80 million for 2025. Pool segment guidance was raised to up 7% (from 6–7%), while Water Solutions was slightly lowered. Margin expansion and free cash flow remained strong. Management’s confidence in transformation and 80/20 initiatives was consistent, though more detail on implementation was offered.
* Analyst focus evolved from clarifying tariff impacts and Pool pricing to examining competitive dynamics, inventory, and digital investments. Management’s tone was stable and forward-looking.

RISKS AND CONCERNS

* Management cited ongoing tariff uncertainty, specifically mentioning that “tariff uncertainty continues.” The guidance does not include further China and Mexico impacts, which “could go into effect later this year; however, these are expected to be immaterial for this year.”
* Competition from lower-cost foreign products and potential pricing pressure in commodity segments were acknowledged. Stauch said, "It's starting to emerge... we have to make sure that we're offering better value to our customers."
* Market softness in Water Solutions, particularly in international markets such as China, was highlighted.
* Analyst concerns focused on pricing power durability, competitive threats, and the sustainability of recent margin expansion.

FINAL TAKEAWAY

Pentair delivered another record quarter with sales and earnings growth driven by transformation initiatives and strategic execution, resulting in increased full year guidance. The Pool and Flow segments led performance, supported by disciplined capital deployment and a strong balance sheet. The company remains confident in its multi-year transformation strategy, ongoing efficiency gains, and the ability to offset tariff uncertainties, while continuing to pursue growth through innovation and targeted acquisitions.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/pnr/earnings/transcripts]

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