Pentair Slashes Guidance as Pool Destock Erases Growth Streak
Pentair cut its full-year GAAP earnings outlook to $3.86-$4.06 a share after a Pool inventory realignment drove second-quarter sales down 17%.
Pentair (PNR) reported a 17% drop in second-quarter sales to $933 million, ending a three-quarter run of growth as distributors worked down roughly $170 million of excess Pool inventory. The reversal follows gains of 3% in the first quarter of 2026, 5% in the fourth quarter of 2025, and 3% and 2% in the two quarters before that, marking the sharpest swing in the water-treatment and pool-equipment maker's recent results.
The Pool segment absorbed the bulk of the damage. Segment sales fell 42% year over year, a reversal from 1% growth in the first quarter and 9% growth a year earlier, as a channel inventory realignment turned out larger than anticipated and higher rates and inflation weighed on demand. Pool segment income dropped 62%, and segment return on sales fell 1,230 basis points to 23.4%, a stark contrast to the 30-basis-point margin gain posted in the first quarter and the 160-basis-point gain a year ago.
The rest of the portfolio moved the opposite direction. Flow segment income rose 27% with return on sales up 470 basis points to 26.5%, and Water Solutions segment income climbed 17% with return on sales up 560 basis points to 30.0% — both segments accelerating from margin gains already posted in the first quarter. The divergence left total company operating margin down 150 basis points to 17.9%, or down 100 basis points to 25.4% on an adjusted basis, reversing the expansion trend that had held through the prior four quarters.
Gross margin actually widened to 42.4% from 40.7% a year earlier, a 170-basis-point gain that pointed to production costs as an unlikely culprit for the profit slide. SG&A expense rose to 22.0% of sales from 19.0%, absorbing the gross-margin gain and then some, and driving the operating-margin compression on its own.
GAAP earnings per share fell 11% to $0.80 and adjusted earnings per share fell 18% to $1.14, reversing growth of 5% and 10%, respectively, in the first quarter. Results included about $35 million of IEEPA tariff refunds, a new disclosure not present in any of the four prior quarterly releases.
Pentair cut full-year 2026 GAAP earnings guidance to approximately $3.86 to $4.06 a share, down from $4.83 to $4.93 guided in the first quarter and from $4.94 to $5.09 when the company first introduced 2026 guidance in the fourth quarter of 2025. Adjusted guidance of $4.60 to $4.80 a share was reaffirmed from a July 14 preannouncement but remains well below the $5.30 to $5.40 range given three months earlier. The company also introduced third-quarter guidance for the first time, calling for GAAP earnings of $0.97 to $1.00 a share, down 11% to 13% from a year earlier, and adjusted earnings of $1.05 to $1.08, down 13% to 15%.
Pentair disclosed a pending acquisition of Taco Group Holdings, explicitly excluded from full-year guidance, replacing references in prior releases to the smaller, already-closed Hydra-Stop deal. The company repurchased $150 million of stock in the quarter, up from $75 million a year earlier but down from $200 million in the first quarter, while free cash flow slipped 7% to $553 million from $596 million, reversing gains posted in the third quarter of 2025 and for full-year 2025.