Pentair plc Q4 FY2025 earnings call

Management Statement and Operational Highlights

• Celebrate 60th anniversary and approach Dividend King status; focus on customer obsession, innovation, operational excellence, and sustainability.
• Strategically combined residential flow business with residential water solutions business starting in 2026 to create channel growth, operational scale, and efficiency.
• Q4 2025: 5% sales growth, 15th consecutive quarter of margin expansion; adjusted operating profit up 9%, ROS expanded by 90 basis points to 24.7%, adjusted EPS rose 9% to $1.18.
• Full-year 2025: Record annual sales, adjusted operating income, ROS, and adjusted EPS; record free cash flow of $748 million; robust innovation engine with notable product launches like PFAS Everpure Filtration and Manitowoc ICE Neo.
• 2026 outlook: Confidence in business model and end markets; plan to invest in digital/AI, strengthen portfolio, return capital to shareholders; adjusted EPS guidance range $5.25-$5.40, 3%-4% sales growth, 5%-8% adjusted operating income growth.

Segment Performance

• Flow Segment: Q4 2025: Sales up 9% to $394 million, reportable segment income up 22%, return on sales (ROS) 22.8%. Full-year 2025: Sales up 3% to $1.55 billion, reportable segment income up 14%, ROS 23.3%.
• Water Solutions Segment: Q4 2025: Sales down 10% to $232 million, reportable segment income down 12%, ROS 23.5%. Full-year 2025: Sales down 6%, reportable segment income flat, ROS 23.9%.
• Pool Segment: Q4 2025: Sales up 11% to $393 million, reportable segment income up 11%, ROS 33.6%. Full-year 2025: Sales up 9%, reportable segment income up 11%, ROS 33.8%.

Guidance

• 2026 full-year adjusted EPS guidance range $5.25 to $5.40, an 8% increase at the midpoint.
• Expect approximately 3% to 4% sales growth and approximately 5% to 8% adjusted operating income growth.
• Q1 2026 adjusted EPS guidance approximately $1.15 to $1.18, sales growth 1% to 2%, adjusted operating income up 2% to 5%.
• Target strong free cash flow in 2026 of approximately 100% of net income; Q1 typically a cash use quarter, Q2 highest cash generation quarter.

Risks

• Macro volatility and broader operating environment.
• Inflation, including higher than expected inflation in Q4 2025 from certain metals.
• Tariffs and their incremental impact, particularly in Q1 2026.
• Supply chain dynamics and need to monitor and adjust to protect profitability.

Question and Answer

• Q: Can you give more color on what you're seeing in your commercial water solutions business?

A: John Stauch states CWS businesses returned to growth in 2026, with Manitowoc and Everpure being high margin businesses, and North American market strength.

• Q: Thoughts on the pool segment first quarter guidance?

A: John Stauch and Nick Brazos discuss normal pool year, positioning, and guide reflecting no residential recovery, with pool being a steady business but waiting for market recovery.

• Q: Thoughts on capital priorities outside of dividend?

A: John Stauch mentions healthy balance sheet, continuing to raise dividends, actively looking for M&A bolt-ons and using buyback to return capital to shareholders.

• Q: Impact of eighty-twenty on organic growth?

A: John Stauch states no headwind, with focus on growing quad one customers and bearing fruit in upcoming years.

• Q: Pricing approach in 2026?

A: John Stauch explains aim to offset inflation with price, work cooperatively with channel partners, and focus on adding content and innovation rather than just price increases.

• Q: Contribution of new products to price increase?

A: John Stauch mentions NPI contribution in businesses, with early buy in line with previous years and excitement for new product introductions to be shared at Investor Day.

• Q: Tariff impact and metal inflation?

A: John Stauch and Bob Fishman explain tariff impact and need to price for tariffs, wage inflation, and general inflation, with metal inflation running hot and tariff impact specifically called out.