Analyst Note| Krzysztof Smalec, CFA |
We are raising our fair value estimate for narrow-moat rated Pentair to $64 from $59 following the firm’s 2021 investor day. Pentair raised its guidance for full-year 2021 and now expects sales growth in the range of 17% to 19% (6% to 11% previously) and adjusted EPS in the range of $3.10 to $3.20 ($2.80 to $2.95 previously). From 2022 to 2025, Pentair aims to grow its sales at a mid-single-digit-plus rate and to expand its return on sales by roughly 300 basis points thanks to volume leverage and transformation initiatives, including complexity reduction. Our fair value adjustment reflects more optimistic near- and long-term sales growth and operating margin assumptions.