In its first earnings report since relocating to Ireland, Pentair PLC reported second-quarter results that exceeded earnings expectations but missed on sales.
The company, which is still largely governed from its Golden Valley perch, also said it is exiting its "under performing" water transport business in Australia so it can reallocate resources to "higher growth platforms." The Australia transport business became part of Pentair via an acquisition nearly two years ago. Revenues dropped from about $700 million in 2012 to roughly $500 million to 2013 sales as several future projects were canceled, officials explained.
The decision to exit that business plus project delays in the industrial and energy sectors prompted company officials to lower their 2014 and 2015 earnings forecasts Thursday.
CEO Randy Hogan told analysts Thursday that the company "continues to see lower than expected contributions from Canadian oil sands. While we continue to win with both large and small customers, many of the large projects have continued delays in releasing capital spending."
As a result, Pentair, which makes filtration, pump and valve controls and electrical enclosures, now expects 2014 earnings of $3.65 to $3.70 a share. That's a 20 percent boost from 2013 but down from the prior forecast of $3.85 to $4.00 a share. Full year 2014 sales are now expected to rise 2 percent from 2013 to $$7.15 billion, officials told analysts during a conference call Thursday.
For 2015, earnings are expected to reach $4.50 a share, down from the prior forecast of $5.00 a share, Hogan said.
Pentair's stock price fell $5.52, or 7.9 percent, to $64.07 a share.
During the quarter, total sales fell 3 percent to $1.9 billion. Adjusted operating earnings rose 5 percent to $283 million or $1.04 cents a share. Analysts on average expected sales of $1.93 billion and earnings of $1.03 a share.
Including costs for restructuring, acquisitions and the relocation of Pentair's corporate domicile to Ireland, Pentair earnings were 82 cents a share, which is up from 72 cents a year ago.
Hogan said Thursday morning that he was still pleased with results in a tough environment. "Our second quarter met our expectations with many of our end markets recovering, albeit at a more moderate rate than anticipated." He added that results overcame "lingering" economic headwinds in industrial and energy.
Pentair's valve and controls unit, which caters to oil fields and refineries, power companies and factories, rose 2 percent to $1.4 billion despite a drop in sales to mining customers. Pentair's second largest unit, Processing Technologies, which makes water treatment systems for residential and commercial pools, fish farms, dairies and food and beverage-making customers, saw sales rise 4 percent to $497 million during the quarter.
Flow Technologies, which makes equipment that pumps residential, municipal, farm and factory water and waste water, fell 2 percent to $300 million in sales for the quarter.
Technical Solutions, which makes protective enclosures for electrical equipment and heat management systems for buildings, saw sales rise 3 percent to $409 million.
Following Pentair's 2012 merger with Tyco Flow Controls, officials said that integration efforts are on track. Pentair has about 28,600 employees worldwide, including 9,300 in the United States and 1,800 in Minnesota.