Pentair stock falls after surprise lowering of first-quarter forecast

Displeased shareholders punished Pentair PLC's stock Wednesday after the company surprised Wall Street by lowering its earnings forecast for the first quarter.

Pentair, which is based in Ireland but largely managed from Golden Valley, watched its stock fall 5.5 percent in early trading Wednesday. The stock recovered somewhat through the day and closed at $62.21 a share, down 3.5 percent, or $2.25 a share.

Investors reacted to Pentair's news late Tuesday that it now expects quarterly revenue of $1.48 billion, which is $120 million lower than previously forecast for the quarter that ended March 28. The company will report full earnings later this month.

In a statement, Pentair officials said that the maker of industrial and residential pumps, filtration systems and valves has been "negatively impacted by the stronger dollar, slower than expected oil and gas industry shipments and orders, broad-based slowing of global capital spending and customer inventory destocking."

As a result of the lower revenue expectations, Pentair now expects first-quarter earnings from continuing operations to be 65 cents a share, down from the prior forecast of 75 to 77 cents.

Analysts noted that Pentair is suffering from several industry trends that are affecting many U.S. manufacturers. Companies such as 3M, Polaris, Arctic Cat and others have complained in recent months about the high U.S. dollar affecting profits and trade, because the higher dollar tends to make U.S. exports more expensive overseas. Energy-related product makers are also struggling with the sagging oil and gas prices; Pentair is no exception.

Pentair, which makes valves and fluid control equipment for oil and gas refineries and piping systems, has been hurt as oil and gas producers and drillers cut back on some operations until prices stabilize.

Sterne Agee lowered its guidance for the company and remained "neutral" on its stock recommendation.

Sterne Agee analyst Kevin Bennett told clients in a research note Wednesday that "Pentair's negative first-quarter pre-announcement last night reaffirms our thesis. … Despite its strong operating ability and cash flow generation, we believe the company's geographic and end market exposure are currently on the wrong side of macro trends, making top-line growth tough to come by. We are lowering our estimates in light of management guidance, while maintaining our neutral rating and $69 price target."