Oct 27, 2026 earnings call — Taco acquisition and pool inventory reset
Pentair completed the Taco acquisition and reported third-quarter sales of $976 million and adjusted EPS of $1.18.
Revenue $1.0B (est $1.0B) · EPS $1.18 (est $1.07)
Key quotes
"Taco's estimated 2026 sales are approximately $560 million representing growth of roughly 23% from 2025."
"We completed the previously communicated channel inventory destock, an important milestone that positions the business on a healthier foundation as we enter 2027."
"Flow and Water Solutions continued to deliver sales and segment income growth along with meaningful margin expansion."
Analyst Q&A 9
Pool sell-through and market share outlook
Q (Brian Blair · Oppenheimer): Analyst asked what assumptions underlie the baseline outlook for pool reset growth and whether pool market share is stabilizing or if lost share will be recaptured.
A: Management said $1.45 billion is a starting point assuming flat to this year's sell-through. They expect to compete to recover lost share but have not yet dialed in market share for 2027. Full guidance and better insight will come in early February.
"Really what we are just trying to do is say if we were to remain flat to the current year's sell through, it would be $1.45 billion." — John L. Stauch (CEO)
Pool mix and price-cost outlook
Q (Brett Linzey · Mizuho): Analyst asked whether there were mix dynamics or trade-downs in pool sales and how to think about mix going forward, plus the pricing/cost outlook and hedging for the near term.
A: Management said they saw mid single digit sell-through and significant inventory burn in the quarter, which affected margins. They do not think mix is the issue and expect to recover inflationary cost increases with pricing in 2027, while clarifying IEPA recoveries separately. They are also investing in sales and targeted marketing.
"But overall, our initial indications are we should be able to recover on the cost side price for 2027." — John L. Stauch (CEO)
Pool pricing strategy and Flow outlook
Q (Adam Farley · Stifel): Analyst asked if the company will absorb costs to compete for share in pools, and asked about near- and medium-term growth drivers in Flow, including residential versus other markets.
A: Management said they will not eat costs to compete; instead they will reinforce product value, targeted marketing, dealer training, and service to win back share rather than a pure price play. They noted some Flow headwinds from delayed spending in food and beverage, but other Flow lines drove double digit growth in the quarter.
"We think by going out and making sure that our products are understood and that they are like for like replacements to products we had and reminding consumers of the great experience they have had under the Pentair brand." — John L. Stauch (CEO)
Inventory destock and dealer reengagement
Q (Wolfe): Analyst asked for more detail on the company's confidence that the inventory destock is complete and how receptive mid and small pool builders were when the company re-engaged them.
A: Management said they have seen roughly $280 million of destock over Q2 and Q3 and expect ending channel inventory to be down further by the end of Q4, which gives confidence that sell-in can equal sell-through in 2027. They also said they are focusing national account service on the two largest distributors and have a dedicated team for nonaffiliated distributors; some independents are slower to return but progress is being made.
"We have seen roughly $280 million of destock over Q2 and Q3." — Robert W. Hau (CFO)
Flow wins and Taco capital/delever plan
Q (Tyler Bisson · Goldman Sachs): Analyst asked how recent Flow segment wins are converting to revenue and when the delayed food and beverage spending might return, and also asked about Taco acquisition impacts on working capital, CapEx, capital allocation, and delever timing.
A: Management said the sustainable process solutions business has a strong pipeline and order rate, and outside food and beverage they are seeing infrastructure and municipal wins and building backlog into 2027; they are not counting on a significant food and beverage recovery next year. For Taco, they expect combined working capital and CapEx to remain within current operating capacity, noted Taco spends more CapEx but within capacity, and said pro forma leverage starts the fourth quarter at about 2.5 times with an expected deleveraging back to 1.5 to 2x over the next 24 months.
"As I said in my prepared remarks, you know, on a pro forma basis, we start the fourth quarter at about 2.5 times or so." — Robert W. Hau (CFO)
Margins and Water Solutions performance
Q (Andy Kaplowitz · Citi): Analyst asked for an update on margin expansion initiatives (80/20) and where further ROS expansion is possible in Flow and Water Solutions, and asked for a breakdown of Water Solutions performance.
A: Management said they were pleased with ROS expansion and that Water Solutions showed significant gross margin expansion even excluding tariff refunds; they continue to run complexity reduction plays to expand ROS. They added commercial water continues to grow mid single digits while residential still faces headwinds from low housing closings, starts, and higher mortgage rates.
"For the Water Solutions business, the gross margin expansion was significant." — John L. Stauch (CEO)
Details behind $1.45bn pool guide
Q (Michael · TD Cowen): Analyst asked what underpins the $1.45 billion pool guide and requested a breakdown between residential vs commercial and new build vs remodel/repair.
A: Management clarified $1.45 billion is a starting point, roughly this year's sell-through and modestly higher than 2025, not a shipping forecast. They have not yet completed dealer discussions to dial in mix by state, region, new builds or aftermarket, and will provide a clearer mix after Q4 as they engage dealers and use the new regional selling structure.
"Recognizing that is roughly this year's sell through, which is modestly higher, you know, call it a few points higher than it was in 2025." — John L. Stauch (CEO)
Regional sales structure changes
Q (RBC Capital): Analyst asked what is changing with the new regional sales structure, what was wrong with the prior structure, and how the company will avoid reintroducing complexity when empowering regional leaders.
A: Management said the new regional approach tailors product value and marketing to local differences like energy costs and climate, and adds investments in service, technical and field capabilities that were previously lacking. They said central discipline will remain—using tools like 80/20 to set parameters—while empowering local execution so dealers get the right local support without reverting to unneeded complexity.
"And if you are running a national strategy both on marketing campaigns or targeting a product, you miss the local nuances that you need to service your dealers on." — John L. Stauch (CEO)
Pool margin target and capital allocation
Q (RBC): Analyst asked whether the 30% ROS expectation for the pool business next year is a long-term target or includes one-time investments, and how the share price pullback affects the choice between paying down debt versus repurchasing shares.
A: Management said the 30% ROS target reflects the premium brand, product offering and service, and they expect volume leverage to help margins while reinvesting part of the gains into marketing, NPI and service; a healthy '3' in front of the margin is the right base. On capital allocation, they said choices are largely an 'and' not an 'or'—they can invest organically, do acquisitions, raise the dividend and repurchase shares while maintaining the balance sheet and delevering over time.
"I still think having a healthy 3 in front of it is the right answer, but I do not think it has to grow disproportionately every single year to add value." — John L. Stauch (CEO)