Pentair's fourth-quarter sales and profits slide but beat analysts' expectations

Despite setbacks with oil-equipment customers and falling sales and earnings, Pentair PLC produced a fourth quarter that beat analysts' expectations.

The maker of valves, pumps and filtration systems — based in England but largely run out of Golden Valley — reported fourth-quarter sales that fell 2 percent to $1.8 billion and earnings that plummeted 24 percent to $92.2 million, or 51 cents a share, the company reported Tuesday.

Excluding discontinued operations, fourth-quarter adjusted earnings fell 3 percent to $1.13 per share, which handily beat Wall Street analysts' expectations of $1.04 per share. The company also beat analysts' sales projections of $1.75 billion.

The quarter, however, was hurt by negative foreign currency translations and by the downturn in the oil and gas sector. Positives seen in Pentair's metal enclosures, technical solutions and food/beverage units couldn't erase negatives occurring in businesses that serve energy clients.

Further, company officials said they have determined that the fair value of Pentair's second-largest unit, Valves and Controls, is now "less than its carrying value." As a result, the company expects to take an impairment charge of $400 million to $600 million for full-year 2015. The exact amount will be determined before the company posts its annual report this spring.

In the fourth quarter, Valves and Controls had $474 million in sales, down 22 percent from the same quarter a year ago. The unit's quarterly income was $48 million, down 59 percent.

"Our businesses serving the energy and industrial markets will likely face continued challenges in 2016," Pentair CEO and Chairman Randy Hogan told investors Tuesday during a call.

He added that the division is now meeting sales and order forecasts for the second consecutive quarter, but said "gross margins remain under pressure due to project pricing and mix."

The company's stock closed Tuesday at $44.60, down $2.03, or 4.35 percent.

For the full year, Pentair sales fell 8 percent to $6.4 billion, while profits more than doubled to $469 million, or $2.57 a share. Excluding pending impairment charges, operating income is expected to be $732 million, or $3.94 a share, 9 cents above analysts' expectations.

Hogan said Pentair is maintaining its full-year 2016 earnings guidance of $4.05 to $4.25 per share. The figure "assumes continued difficult business conditions, combined with additional productivity actions," he said. "We continue to believe in the long-term prospects of all of our businesses, and we expect our proven track record around operational rigor and cash flow will help us manage our way through this uncertain economic environment."