Analyst Forecasts Just Became More Bearish On Pool Corporation (NASDAQ:POOL)

Market forces rained on the parade of Pool Corporation (NASDAQ:POOL) shareholders today, when the analysts downgraded their forecasts for this year. Revenue estimates were cut sharply as the analysts signalled a weaker outlook - perhaps a sign that investors should temper their expectations as well.

Following the downgrade, the consensus from ten analysts covering Pool is for revenues of US$5.7b in 2023, implying a perceptible 3.9% decline in sales compared to the last 12 months. Statutory earnings per share are supposed to descend 10% to US$15.34 in the same period. Previously, the analysts had been modelling revenues of US$6.0b and earnings per share (EPS) of US$16.37 in 2023. Forecasts are clearly less bullish than previously, given the reduced revenue forecasts and the minor downgrade to earnings per share expectations.

See our latest analysis for Pool

Despite the cuts to forecast earnings, there was no real change to the US$388 price target, showing that the analysts don't think the changes have a meaningful impact on its intrinsic value. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. There are some variant perceptions on Pool, with the most bullish analyst valuing it at US$460 and the most bearish at US$315 per share. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await Pool shareholders.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Pool's past performance and to peers in the same industry. We would highlight that sales are expected to reverse, with a forecast 5.1% annualised revenue decline to the end of 2023. That is a notable change from historical growth of 18% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 4.4% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Pool is expected to lag the wider industry.

The Bottom Line

The biggest issue in the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds lay ahead for Pool. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. Overall, given the drastic downgrade to this year's forecasts, we'd be feeling a little more wary of Pool going forwards.

Worse, Pool is labouring under a substantial debt burden, which - if today's forecasts prove accurate - the forecast downgrade could potentially exacerbate. To see more of our financial analysis, you can click through to our free platform to learn more about its balance sheet and specific concerns we've identified.

You can also see our analysis of Pool's Board and CEO remuneration and experience, and whether company insiders have been buying stock.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.