Update: Pentair Gains Momentum On Rosy Outlook

| About: Pentair Inc. (PNR)

Summary

Pentair has announced its earnings outlook.

The company is set to generate double-digit growth in earnings.

Its dividend growth is also sustainable.

Pentair is currently offering an attractive entry point.

Pentair PLC (NYSE:PNR) has announced earnings guidance for this year. The company is looking to generate earnings per share in the range of $3.72-$3.74 for the full year, compared to $2.62/share in the last year. Along with this year's earnings guidance, Pentair also announced sales and earnings guidance for the following year. It is expecting to generate earnings per share in the range of $3.72-$3.74 for 2015, representing an increase of 13%-17% over 2014.

In my recent article, I recommended investors to buy this stock on the dips, as it has almost lost 20% of value in the past twelve months on the back of concerns regarding oil & gas prices, along with headwinds in the metal and minerals industry. I had predicted that the impact of fall in oil prices is expected to be short-term, and would not strongly hamper its earnings. I also said that the company's stock will gain momentum in the comings days, as I was seeing strong growth in its earnings. Pentair's recent earnings guidance affirmed my opinion that the impact of fall in prices would not hinder its financial performance. Its stock gained momentum again on the back of a rosy outlook, up almost 4.5% on the announcement.

In addition, the company has recently announced a massive increase of 16% in its dividends, along with the new buyback program of $1B. I believe that the company's dividends are completely safe, and it has potential to sustain its dividend growth in the coming years. Its cash flows are expanding with the increase in earnings, and the free cash flow conversion ratio is more than 100% of income. In 2015, the company is looking to generate free cash flows of $925 million, representing a conversion rate of more than 115% of net income. Therefore, I strongly recommend investors to buy this stock at the existing price, which is well-below its 52-week high of $83/share.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

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Tagged: , Industrial Equipment & Components, Earnings
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