Core Insights - Pentair plc is recognized as a highly profitable manufacturing stock, with RBC Capital Markets maintaining an "Outperform" rating and increasing the 12-month price target from US$121.00 to US$124.00, citing solid earnings quality in Q3 results [1][2] Financial Performance - Pentair achieved a 160 basis-point expansion in return on sales and a strong incremental of approximately 82% in its Q3 results [1] - The company reported a return on invested capital of around 16.7%, which is an increase of approximately 120 basis points [2] Market Position - Approximately 75% of Pentair's business is derived from replacement and aftermarket markets, providing a defensive advantage amid broader industrial softness [2] - The company has successfully implemented tariff-mitigating price increases without signs of demand destruction, indicating strong pricing power [2] Business Segments - Pentair operates globally in water and fluid solutions, with segments including Flow, Water Solutions, and Pool, catering to residential, commercial, and industrial needs [3]

Core Viewpoint - Pentair plc will participate in the Baird 2025 Global Industrial Conference on November 12th in Chicago, IL, highlighting its commitment to sustainable water management [1] Company Participation - President and CEO John L. Stauch and EVP and CFO Bob Fishman will present at 9:05 a.m. Central Time [1] - Incoming CFO Nick Brazis will engage in investor meetings during the conference [1] Event Details - The conference is scheduled for November 12th, 2025, indicating the company's proactive approach to investor relations and industry engagement [1]

Core Viewpoint - The article discusses the author's perspective on Pentair plc (NYSE: PNR), suggesting that the stock is relatively overpriced based on fundamental analysis and market sentiment tracking [1]. Group 1: Company Analysis - Pentair plc has been identified as a company that may not meet the expectations set by its current stock price, indicating a potential disconnect between market perception and actual performance [1]. - The author utilizes a software tool developed over the years to assess the levels of optimism and pessimism in stock prices, which aids in identifying investment opportunities [1]. Group 2: Investment Strategy - The investment strategy focuses on companies that have a higher likelihood of surprising the market positively in the near future, suggesting a proactive approach to capitalizing on market inefficiencies [1].

PART I FINANCIAL INFORMATION This section presents the unaudited condensed consolidated financial statements, management's discussion, market risk, and controls [ITEM 1. Financial Statements (Unaudited)](index=3&type=section&id=ITEM%201.%20Financial%20Statements%20(unaudited)) This section presents Pentair's unaudited condensed consolidated financial statements, including operations, balance sheets, cash flows, and equity changes [Condensed Consolidated Statements of Operations and Comprehensive Income](index=3&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income) Pentair reported increased net sales and significant growth in operating income and net income for both the three and nine months ended September 30, 2025, compared to the same periods in 2024, driven by improved gross profit margins and reduced net interest expense | Metric (in millions, except per-share data) | Three months ended Sep 30, 2025 | Three months ended Sep 30, 2024 | Nine months ended Sep 30, 2025 | Nine months ended Sep 30, 2024 | | :------------------------------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net sales | $1,022.0 | $993.4 | $3,155.5 | $3,109.9 | | Gross profit | $418.6 | $393.2 | $1,278.5 | $1,221.2 | | Operating income | $231.7 | $179.9 | $652.5 | $608.7 | | Net income | $184.3 | $139.6 | $487.7 | $459.0 | | Basic earnings per ordinary share | $1.13 | $0.84 | $2.97 | $2.77 | | Diluted earnings per ordinary share | $1.12 | $0.84 | $2.94 | $2.75 | - Net sales increased by **2.9%** for the three months ended September 30, 2025, and by **1.5%** for the nine months ended September 30, 2025, compared to the prior year periods[8](index=8&type=chunk) - Operating income saw a substantial increase of **28.8%** for the three months and **7.2%** for the nine months ended September 30, 2025, reflecting improved operational efficiency[8](index=8&type=chunk) [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of September 30, 2025, Pentair's total assets increased, primarily driven by higher goodwill and intangibles due to acquisitions, while total liabilities also rose, mainly in current liabilities and other non-current liabilities | Metric (in millions) | September 30, 2025 | December 31, 2024 | | :------------------- | :----------------- | :---------------- | | Total current assets | $1,445.1 | $1,436.1 | | Goodwill | $3,528.8 | $3,286.6 | | Intangibles, net | $1,088.0 | $1,033.8 | | Total assets | $6,759.6 | $6,446.5 | | Total current liabilities | $988.2 | $895.1 | | Long-term debt | $1,580.1 | $1,638.7 | | Total liabilities | $2,977.2 | $2,883.6 | | Total equity | $3,782.4 | $3,562.9 | - Goodwill increased by **$242.2 million** from December 31, 2024, to September 30, 2025, primarily due to the Hydra-Stop acquisition[10](index=10&type=chunk)[34](index=34&type=chunk) - Total equity increased by **$219.5 million**, from **$3,562.9 million** at December 31, 2024, to **$3,782.4 million** at September 30, 2025[10](index=10&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Pentair generated significantly more cash from operating activities in the first nine months of 2025 compared to 2024, while cash used in investing activities increased substantially due to acquisitions | Cash Flow Activity (in millions) | Nine months ended Sep 30, 2025 | Nine months ended Sep 30, 2024 | | :------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $764.0 | $680.2 | | Net cash used for investing activities | $(354.3) | $(68.2) | | Net cash used for financing activities | $(370.8) | $(560.0) | - Net cash provided by operating activities increased by **$83.8 million (12.3%)** in the first nine months of 2025, primarily reflecting higher net income and favorable changes in working capital[12](index=12&type=chunk)[109](index=109&type=chunk) - Net cash used for investing activities increased by **$286.1 million**, largely due to the **$292.2 million** acquisition of Hydra-Stop in 2025[12](index=12&type=chunk)[111](index=111&type=chunk) [Condensed Consolidated Statements of Changes in Equity](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Equity) Pentair's total equity increased from December 31, 2024, to September 30, 2025, primarily due to net income, partially offset by share repurchases and dividends declared | Equity Component (in millions) | Balance - Dec 31, 2024 | Balance - Sep 30, 2025 | | :----------------------------- | :--------------------- | :--------------------- | | Ordinary shares | $1.7 | $1.7 | | Additional paid-in capital | $1,501.7 | $1,351.8 | | Retained earnings | $2,336.1 | $2,700.6 | | Accumulated other comprehensive loss | $(276.6) | $(271.7) | | Total | $3,562.9 | $3,782.4 | - Net income contributed **$487.7 million** to retained earnings for the nine months ended September 30, 2025[8](index=8&type=chunk)[14](index=14&type=chunk) - Share repurchases totaled **$175.0 million** for the nine months ended September 30, 2025, reducing additional paid-in capital[14](index=14&type=chunk)[122](index=122&type=chunk) - Dividends declared amounted to **$123.3 million ($0.75 per share)** for the nine months ended September 30, 2025[14](index=14&type=chunk)[124](index=124&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed disclosures and explanations for the condensed consolidated financial statements, covering accounting policies, revenue, acquisitions, debt, and segment information [Note 1. Basis of Presentation and Responsibility for Interim Financial Statements](index=8&type=section&id=Note%201.%20Basis%20of%20Presentation%20and%20Responsibility%20for%20Interim%20Financial%20Statements) The unaudited condensed consolidated financial statements are prepared in accordance with SEC requirements for interim reporting, allowing for condensation or omission of certain GAAP footnotes - Financial statements are prepared following U.S. SEC requirements for interim reporting, allowing for condensed GAAP information[18](index=18&type=chunk) - Management is responsible for the fair presentation of these unaudited condensed consolidated financial statements[19](index=19&type=chunk) - Interim results and trends may not be indicative of a full year due to quarterly variations in revenues, expenses, cash flows, assets, and liabilities[20](index=20&type=chunk) [Note 2. Revenue](index=8&type=section&id=Note%202.%20Revenue) Pentair disaggregates revenue by reportable segment, geographic location, and vertical market, showing increased sales in the U.S. and Residential markets Geographic Net Sales (in millions) | Region | Three months ended Sep 30, 2025 | Three months ended Sep 30, 2024 | Nine months ended Sep 30, 2025 | Nine months ended Sep 30, 2024 | | :-------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | U.S. | $703.9 | $687.6 | $2,236.0 | $2,166.4 | | Western Europe | $126.7 | $117.0 | $371.8 | $375.8 | | Developing | $130.6 | $129.9 | $375.8 | $391.9 | | Other Developed | $60.8 | $58.9 | $171.9 | $175.8 | | Consolidated | $1,022.0 | $993.4 | $3,155.5 | $3,109.9 | Vertical Market Net Sales (in millions) | Market | Three months ended Sep 30, 202

Core Insights - Pentair plc (PNR) reported adjusted earnings per share (EPS) of $1.24 for Q3 2025, exceeding the Zacks Consensus Estimate of $1.18 by 5% and marking a 14% increase from the previous year [1][10] - The company raised its 2025 EPS guidance to $4.85-$4.90, indicating a year-over-year growth of 12.6% [11] Financial Performance - Net sales increased by 3% year over year to $1.022 billion, surpassing the Zacks Consensus Estimate of $1.005 billion [2][10] - Gross profit rose by 6.5% to $418.6 million, with a gross margin of 41%, up from 39.6% in the prior year [2][10] - Operating income, including one-time items, was $231.7 million, reflecting a 28.8% increase from the previous year [3] Segment Performance - Flow segment net sales reached $394 million, a 6% increase year over year, with operating earnings rising 15% to $95 million [5] - Water Solutions segment net sales decreased by 6% to $273 million, but earnings increased by 6% to $68 million [6] - Pool segment net sales totaled $354 million, up 7% year over year, with operating earnings growing 3% to $128 million [6] Cost Management - Selling, General and Administrative (SG&A) expenses decreased by 14.8% to $162 million [3] - Research and development expenses increased by 8% year over year to $24.7 million [3] Cash Flow and Balance Sheet - Cash and cash equivalents at the end of Q3 2025 were approximately $128 million, up from $119 million at the end of 2024 [7] - Net cash generated from operating activities was $764 million for the nine-month period ending September 30, 2025, compared to $680 million in the prior year [7] - Long-term debt decreased to $1.58 billion as of September 30, 2025, down from $1.64 billion at the end of 2024 [7] Share Repurchase - Pentair repurchased 1.8 million shares for $175 million in 2025, with $275 million remaining under its share repurchase authorization as of June 30, 2025 [8] Future Guidance - For Q4 2025, Pentair expects adjusted EPS between $1.11 and $1.16, indicating a 5% rise at the midpoint [12] - The company anticipates Q4 sales to increase by 3-4% compared to the same quarter last year [12] Stock Performance - Pentair's stock has appreciated by 11.2% over the past year, outperforming the industry growth of 1.1% [13]

Financial Data and Key Metrics Changes - In Q3, the company achieved sales of $1.022 billion, a 3% increase year-over-year, with adjusted operating income rising 10% to $263 million and adjusted EPS increasing 14% to $1.24 [6][13] - Return on sales (ROS) expanded by 160 basis points to 25.7% [6][13] - The company generated record free cash flow of $719 million year-to-date, up 14% year-over-year, and reduced its net debt leverage ratio to 1.3x from 1.4x a year ago [16] Business Line Data and Key Metrics Changes - Flow segment sales increased 6% year-over-year to $394 million, with residential sales up 3%, commercial sales up 5%, and industrial sales up 10% [13][14] - Water Solutions sales declined 6% to $273 million, with commercial sales down 6% and residential sales also down 6% year-over-year [14] - Pool sales increased 7% to $354 million, driven by price, volume, and the Gulfstream acquisition, although segment income rose only 3% [15] Market Data and Key Metrics Changes - The company expects Flow sales to grow in low single digits, Water Solutions to decline in mid-single digits, and Pool sales to increase approximately 7% for the full year [17] - The company anticipates fourth-quarter sales to be up approximately 3% to 4% [17] Company Strategy and Development Direction - The company is focused on transformation initiatives and has delivered approximately $56 million in transformation savings year-to-date, aiming for $80 million in 2025 [8][9] - The company continues to invest in growth initiatives and innovation through digital and product technology [8] - The company plans to share more insights on its 80/20 actions at an upcoming Investor Day in March [7] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to drive efficiencies and profitability, with a balanced capital deployment strategy [10][19] - The company is cautious about potential headwinds such as tariffs and high interest rates but remains optimistic about growth opportunities [64] Other Important Information - The company announced the acquisition of Hydra-Stop for approximately $292 million, enhancing its Flow business [6][16] - The CFO will be leaving the company effective March 1, 2026, with a smooth transition planned [10][11] Q&A Session Summary Question: Discussion on Pool margin productivity - Management acknowledged the challenging comparison for Pool's margin but expressed optimism for a rebound in Q4, highlighting investments made to drive future growth [23][24] Question: Update on Water Solutions growth - Management noted a slight decrease in core Water Solutions growth due to lagging commercial growth and international sales softness, particularly in China [33][34] Question: Transformation savings context - Management provided insights into the sources of transformation savings, emphasizing balanced contributions across all four pillars of transformation [43][44] Question: Hydro-Stop acquisition growth potential - Management indicated that Hydro-Stop is expected to contribute approximately $50 million in revenue for 2026, with cross-selling opportunities anticipated [87] Question: Digital sales percentage and future outlook - Management discussed the importance of digital strategies and the need for investment in digital front ends to enhance customer experiences [99][101]

Financial Data and Key Metrics Changes - In Q3, the company achieved sales of $1.022 billion, a 3% increase year-over-year, with adjusted operating income rising 10% to $263 million and adjusted EPS increasing 14% to $1.24 [6][13] - Return on sales (ROS) expanded by 160 basis points to 25.7% [6][13] - The company generated record free cash flow of $719 million year-to-date, up 14% year-over-year, and reduced its net debt leverage ratio to 1.3 times from 1.4 times a year ago [16] Business Line Data and Key Metrics Changes - **Flow Segment**: Sales increased 6% year-over-year to $394 million, with residential sales up 3%, commercial sales up 5%, and industrial sales up 10% [13][14] - **Water Solutions Segment**: Sales declined 6% to $273 million, with commercial sales down 6% and residential sales also down 6% year-over-year [14] - **Pool Segment**: Sales increased 7% to $354 million, driven by price, volume, and the Gulfstream acquisition [15] Market Data and Key Metrics Changes - The company expects Flow sales to grow in low single digits, Water Solutions to decline in mid-single digits, and Pool sales to increase approximately 7% for the full year [17] - The company anticipates fourth-quarter sales to be up approximately 3% to 4% [17] Company Strategy and Development Direction - The company is focused on transformation initiatives and has delivered approximately $56 million in transformation savings year-to-date, aiming for $80 million by the end of 2025 [8][9] - The company continues to invest in growth initiatives and innovation through digital and product technology [8] - The company plans to share more insights on its 80/20 actions at an upcoming Investor Day in March [7] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's execution and increased full-year guidance, expecting adjusted EPS of approximately $4.85 to $4.90, up 12% to 13% from 2024 [7][16] - Management noted that while there are uncertainties due to tariffs and interest rates, they are optimistic about the company's performance and growth opportunities [64] Other Important Information - The company announced that CFO Bob Fishman will be leaving effective March 1, 2026, and Nick Cash will take over [10][11] - The company has been proactive in mitigating the impact of tariffs through price increases and other strategies [18] Q&A Session Summary Question: Discussion on Pool margin productivity and full-year outlook - Management acknowledged the tough comparison for Pool margins but expressed optimism for a rebound in Q4, indicating that investments made in Q3 would drive future growth [23][24] Question: Update on Water Solutions growth - Management noted a slight decrease in core Water Solutions growth due to lagging commercial growth and international sales softness, particularly in China [33][34] Question: Transformation savings and future potential - Management confirmed confidence in achieving the 26% ROS target and indicated that transformation savings have been balanced across various operational areas [36][43] Question: Insights on Flow segment pricing and performance - Management highlighted strong performance across residential, commercial, and industrial sectors, with price increases contributing positively [50][51] Question: Hydrostat acquisition impact - Management confirmed expectations of $10 million in sales contribution from Hydrostat in Q4 and projected $50 million in 2026, emphasizing cross-selling opportunities [73][86]

Financial Data and Key Metrics Changes - In Q3 2025, the company achieved sales growth of 3%, with adjusted operating income increasing by 10% and adjusted EPS rising by 14% to $1.24 [5][13] - Return on sales (ROS) expanded by 160 basis points to 25.7% [5][13] - The company generated record free cash flow of $719 million year to date, up 14% year over year, and increased return on invested capital (ROIC) to 16.7% from 15.2% a year ago [16][17] Business Line Data and Key Metrics Changes - Flow sales increased by 6% year over year to $394 million, with residential sales up 3%, commercial sales up 5%, and industrial sales up 10% [13][14] - Water Solutions sales declined by 6% to $273 million, with commercial sales down 6% and residential sales also down 6% [14][15] - Pool sales increased by 7% to $354 million, driven by price, volume, and the Gulfstream acquisition [15][16] Market Data and Key Metrics Changes - The company expects Flow sales to be up low single digits, Water Solutions to be down mid-single digits, and Pool sales to be up approximately 7% for the full year [18] - The company anticipates fourth quarter sales to be up approximately 3% to 4% [19] Company Strategy and Development Direction - The company is focused on transformation initiatives and has delivered approximately $56 million in transformation savings year to date, aiming for $80 million in 2025 [8][9] - The company continues to invest in growth initiatives and innovation through digital and product technology [7][8] - The acquisition of Hydrostat for $292 million is expected to enhance the commercial Flow business [5][17] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the execution of their strategy and increased full-year guidance, expecting adjusted EPS of approximately $4.85 to $4.90, up 12% to 13% from 2024 [6][18] - Management noted that while there are uncertainties related to tariffs and interest rates, they are optimistic about the company's performance and growth potential [49][50] Other Important Information - The company has raised its dividend for 49 consecutive years and plans to continue share repurchases [8][10] - Bob Fishman, the CFO, will be leaving the company effective March 1, 2026, with a smooth transition planned [10][11] Q&A Session Summary Question: Concerns about Pool margin productivity - Management acknowledged the tough comparison for Pool margins but expressed optimism for a rebound in Q4, highlighting investments made to drive future growth [24][25] Question: Core Water Solutions growth outlook - Management noted a slight decrease in growth expectations for core Water Solutions, attributing it to slower market conditions, particularly in the food service industry [30][31] Question: Transformation savings and future potential - Management confirmed confidence in achieving the $80 million transformation savings target and indicated ongoing opportunities for further savings [36][37] Question: Flow segment pricing and performance - Management reported strong performance across residential, commercial, and industrial segments, with price increases being maintained [39][40] Question: Hydrostat acquisition and growth potential - Management indicated that Hydrostat is expected to contribute $10 million in Q4 and projected $50 million in revenue for 2026, with cross-selling opportunities identified [64][65]

Financial Data and Key Metrics Changes - In Q3, the company achieved sales of $1.022 billion, a 3% increase year-over-year, with adjusted operating income rising 10% to $263 million and adjusted EPS increasing 14% to $1.24 [16][5][6] - Return on sales (ROS) expanded by 160 basis points to 25.7% [6][16] - The company has increased its full-year guidance, now expecting sales growth of approximately 2% and adjusted EPS of approximately $4.85 to $4.90, reflecting a 12% to 13% increase from 2024 [7][23] Business Line Data and Key Metrics Changes - **Flow Segment**: Sales increased 6% year-over-year to $394 million, with residential sales up 3%, commercial sales up 5%, and industrial sales up 10% [18][16] - **Water Solutions Segment**: Sales declined 6% to $273 million, with core sales flat and commercial sales down 6% [19][16] - **Pool Segment**: Sales increased 7% to $354 million, driven by price and volume, with segment income up 3% [20][16] Market Data and Key Metrics Changes - The company reported a record free cash flow of $719 million year-to-date, up 14% year-over-year [21][22] - The net debt leverage ratio improved to 1.3 times, down from 1.4 times a year ago [22] Company Strategy and Development Direction - The company is focused on transformation initiatives that have led to robust margin expansion and operational efficiencies [7][12] - The "eightytwenty" actions are underway, aimed at driving top-line growth and enhancing customer relationships [8][12] - The company plans to share more insights on its strategic initiatives at an upcoming Investor Day in March [8] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's performance and strategic direction, highlighting the successful execution of transformation initiatives [7][27] - The company remains cautious about potential headwinds such as tariffs and high interest rates but is optimistic about growth opportunities in 2026 [75][76] Other Important Information - The company announced the departure of CFO Bob Fishman, effective March 1, 2026, and expressed confidence in the transition to Nick [12][14] - The company has raised its dividend for 49 consecutive years and continues to repurchase shares [10][22] Q&A Session Summary Question: Concerns about pool margin productivity - Management acknowledged the tough comparison for pool margins but expressed optimism about future ROS expansion and investments made to drive top-line growth [33][34] Question: Update on Water Solutions growth - Management noted a slight decrease in growth expectations for Water Solutions, reflecting broader market conditions, but remains optimistic about North American performance [41][42] Question: Transformation savings and future potential - Management confirmed ongoing transformation savings and expressed confidence in achieving further improvements in operational efficiency [52][54] Question: HydroStop acquisition impact - Management indicated that HydroStop is expected to contribute approximately $10 million in Q4 and around $50 million in 2026, with significant cross-selling opportunities [88][100] Question: Digital strategy and future growth - Management emphasized the importance of digital transformation and the need for enhanced customer experiences through technology [114][115]

Core Insights - Pentair plc (PNR) reported quarterly earnings of $1.24 per share, exceeding the Zacks Consensus Estimate of $1.18 per share, and showing an increase from $1.09 per share a year ago, resulting in an earnings surprise of +5.08% [1] - The company achieved revenues of $1.02 billion for the quarter ended September 2025, surpassing the Zacks Consensus Estimate by 1.72% and up from $993.4 million year-over-year [2] - Pentair has consistently surpassed consensus EPS estimates over the last four quarters, indicating strong performance [2] Financial Performance - The earnings surprise for the previous quarter was +4.51%, with actual earnings of $1.39 per share compared to an expected $1.33 [1] - The current consensus EPS estimate for the upcoming quarter is $1.17, with projected revenues of $1.01 billion, while the estimate for the current fiscal year is $4.85 on $4.15 billion in revenues [7] Market Position - Pentair shares have increased by approximately 8.6% since the beginning of the year, while the S&P 500 has gained 14.5%, indicating underperformance relative to the broader market [3] - The Zacks Industry Rank places Waste Removal Services in the top 39% of over 250 Zacks industries, suggesting a favorable industry outlook [8] Future Outlook - The sustainability of Pentair's stock price movement will depend on management's commentary during the earnings call and future earnings expectations [3][4] - The estimate revisions trend for Pentair was favorable ahead of the earnings release, resulting in a Zacks Rank 2 (Buy), indicating expected outperformance in the near future [6]