Pentair (PNR) shares fell 10% following the company's Q1 earnings report on Tuesday but the sell off, tied to warnings of a potential inventory destocking, was "overdone," RBC Capital Markets said.
During the company's earnings call, Pentair disclosed expectations for its Pool channel partners to execute an inventory reduction in Q2 and Q3, which stems from a lowered industry volume forecast, especially for high-end discretionary products, the RBC analysts said. Pentair explained that recent price actions had prompted distributors to stock up, the analysts said.
The stock price decline was also driven by H2-weighted guidance and concerns over residential and consumer spending, according to the note.
However, Pentair continues its strong execution on productivity initiatives, margin improvement, and new product introductions, fueling a streak of 16 consecutive quarters of margin expansion, the analysts noted. They said that they have not observed any execution issues or missteps.
RBC maintained the company's stock rating at outperform and lowered the price target to $101 from $107.
Price: 81.36, Change: -1.50, Percent Change: -1.81
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