One month after announcing a $10 billion merger that will broaden its water business, Pentair Inc. posted first-quarter results that provided a clear reason for the deal.
The Golden Valley-based company Tuesday posted lower-than-expected sales partly because of sluggish demand for products pumps and water softeners tied to residential markets. The pending merger with Tyco International's water pipe and valve business is aimed at boosting Pentair's industrial and energy businesses, both of which reported strong gains in the first quarter.
Sales rose 9 percent to $858 million, missing analysts' estimates of $899.3 million for the period ended March 31. Sales in its technical products segment, which makes enclosures for electronics and electrical equipment, fell 1 percent.
Sales in its water business, which makes water storage, filtrations, pumping and treatment systems, increased 14 percent, mostly because of its recent acquisition of Clean Process Technologies, a Dutch water treatment business. Pentair's water segment accounts for almost 70 percent of total revenue.
Earnings were $60.8 million compared with $50.5 million. Earnings per share excluding one-time items were 64 cents, up from 51 cents a year earlier and better than analysts' estimates of 56 cents.
"It was a muted quarter, not indicative of the business going forward assuming the Tyco deal goes through," said John Quealy, an analyst at Canaccord Genuity. The merger with the Tyco division, which stands to double Pentair's size, is expected to be completed in September.
In a conference call, CEO Randall Hogan said the first quarter was solid despite continued softness in European sales and lower flood-related residential and municipal pump sales. Sales of water treatment systems for industrial, energy and food service customers increased by double digits.
The company adjusted its sales forecast for the year to $3.7 billion, compared with its earlier forecast of $3.7 billion to $3.8 billion. The forecast does not include the Tyco business.
