Here’s why shares of Pool Corp. were down today

What happened

Shares of Pool Corp. (BOWL -10.13%) fell on Thursday after the company reported financial results for the second quarter of 2022 that fell short of analysts’ expectations and updated its guidance for the rest of the year. At 2:15 p.m. ET, Pool Corp. was down 11%.

So what

Pool Corp. sells and maintains swimming pools and also sells other outdoor products. The company’s performance in the second quarter was one for the record books. It posted record net sales of nearly $2.1 billion, up 15% from the prior year period. However, this was slightly less than Wall Street expected, leading to disappointment.

To better understand why investors feel the way they do about Pool stocks, consider its two-year growth rate. On a two-year basis, second-quarter net sales increased about 64% – a very atypical growth. Historically, Pool Corp. has increased its turnover by nearly 10% to 15% per year.

Despite record results, the stock is down nearly 40% from its all-time high as investors expect its growth to slow to a more normal pace in the near future. And by missing analysts’ expectations for second-quarter sales, that fear is reinforced today.

Now what

In early 2022, Pool Corp. forecasted an annual profit of $17.94 per share at best. Last quarter, it increased that guidance, then increased it again today. For 2022, management now expects earnings per share (EPS) of $18.38 to $19.13. Over the past 10 years, shares of Pool Corp. absolutely crush the market average (up 858% vs. 192% for the S&P500) due to the robust growth of BPA. It is therefore encouraging to see the trend continuing.

With strong earnings growth, Pool Corp. continues to reward shareholders. In May, the company authorized a $600 million stock buyback plan and increased its quarterly dividend by 25% to $1 per share. If this continues, shares of Pool Corp. could still be an investment that outperforms the market, even if its revenue growth rate slows in the coming quarters.

Jon Quast has no position in any of the stocks mentioned. The Motley Fool recommends Pool. The Motley Fool has a disclosure policy.

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