Pentair

The Pool segment's adjusted return on sales (ROS) fell 1,230 bp to 23.4% in Q2, while Flow (+470 bp to 26.5%) and Water Solutions (+560 bp to 30.0%) improved. The TTM operating margin is 22.8% vs 23.3% in 2025, still well up from 15–18% in 2022–23, but the most profitable segment is under pressure.

ROIC 14.0% vs 15.6% in 2025 and 18.1% in 2021; still above a WACC of 8.75%, but falling.

Revenue has stood still for four years ($4.12bn in 2022, 4.18bn in 2025), and 2026 is guided at −4 to −7%. Q2 sales fell 17% to $933m (Pool −42%, Water Solutions −5%, Flow +5%), and adjusted EPS fell 18% to $1.14. The expected growth in 2027 (+9%) is mainly bought through Taco.

The purchase of Taco Group for $1.425bn (cash and a $1.4bn bridge facility) was announced two weeks after the guidance cut. It lifts net leverage to about 2.4x and adds only $0.10–0.15 of EPS in 2027 (about 2–3%). At the same time $150m of shares were bought back in Q2.

Trailing P/E 13.3 vs 15.4–26.6 at year-ends 2021–25; forward P/E 10.9 (about 11.3 on the lowered guidance of $4.60–4.80) vs 12.8–21.4; EV/EBITDA 9.8 vs 13.2–17.7; P/FCF 12.6 vs 21.9–26.6. Clearly below its own history on every multiple after the fall, but estimates are still coming down, and Pool could fall further. (The old figures were from before the guidance cut.)

Destocking at the big pool distributors removed about $170m of Q2 sales and forced guidance down from sales +2–4% and EPS $5.30–5.40 to sales −4 to −7% and EPS $4.60–4.80. The stock fell 15% to $64.33 on 15/7 and has since continued down to about $53.

Pool sales go through a few large distributors (especially Pool Corp), and their inventory decisions feed straight through; Pool fell from about 37% of group sales to 26% in Q2.

CFO Nicholas Brazis left with immediate effect on 14/7 after only four months, the same day as the guidance cut. Former CFO Robert Fishman is back as interim CFO, so the post has changed three times in about a year.

Several class actions (including Robbins Geller, Hagens Berman and Kaplan Fox) over misleading statements about channel inventory and internal controls for the period 11/3/2025 to 14/7/2026; the lead-plaintiff deadline is 2/10/2026.

The company itself cites higher interest rates and inflation as the cause of the worsened conditions; new pools and renovations follow the housing and interest-rate market.

Net debt of $1.67bn (1.6x EBITDA) rises to about 2.4x when Taco closes, funded with a $1.4bn bridge facility. S&P has affirmed BBB-, the lowest investment-grade notch; the target is below 1.5x within two years.

Only small sales in February (the CTO for $0.67m and a board member for $0.70m, both at about $100). No insider buying despite a price fall of over 50%, but no sales after the guidance cut either.

The transformation programme lifted ROS in Water Solutions by 560 bp to 30.0% and in Flow by 470 bp to 26.5% in Q2, despite falling sales in Water Solutions.

Buybacks ($447m) and dividends ($169m) were $616m TTM, below FCF of $673m; the share count fell 1.6%. The margin is thin, though, and Taco is debt-funded.