Hayward Holdings

Hayward's second-quarter adjusted EPS of $0.26 came in $0.02 above the FactSet consensus estimate. Net sales increased by 6% year over year on higher pricing as volumes stayed flat. Management maintained its full-year outlook and expects net sales growth of around 5% and adjusted EPS of $0.84-$0.87.

Why it matters: Hayward delivered a clean earnings report while its competitor Pentair's second-quarter pool sales plummeted 42% year over year due to channel inventory destocking headwinds and execution issues. We believe that Hayward has captured some market share thanks to solid execution and strong dealer relationships. We think the company benefited from Pentair's stumbles, as the latter deprioritized its relationships with smaller dealers and ceded like-for-like replacement opportunities in the aftermarket. While Pentair's commentary over the last couple of quarters suggested that pool owners have slowed the pace of upgrades due to affordability concerns, Hayward sounded more upbeat, reporting healthy demand for its own discretionary product categories (including automation, lighting, and salt chlorine generators).

The bottom line: We've raised our fair value estimate for narrow-moat-rated Hayward to $18 per share from $17, driven by slightly more optimistic revenue growth projections and the time value of money. The stock is trading roughly 15% below our updated fair value estimate. Hayward believes that its own channel inventory levels are balanced heading into the second half of the year, making the company well positioned to reach its 2026 targets. We expect volume growth to accelerate in 2027 and beyond as new pool construction is currently at trough levels. Furthermore, we see a long runway for growth as Hayward continues to upgrade the large installed base of existing pools that currently do not have automation solutions. We estimate that the content opportunity on smart pool pads can be over 3 times higher than in legacy swimming pools.

Following the second-quarter earnings release, we’ve raised our fair value estimate to $18 per share from $17 due to our slightly more optimistic revenue growth projections and the time value of money. Management maintained its full-year outlook and expects net sales growth of around 5% and adjusted EPS of $0.84-$0.87.

We assume average compound annual organic revenue growth of roughly 6.5% through 2030. We think the firm still has ample room for growth in the swimming pool end market, thanks to the growing penetration of variable-speed pumps and automation systems.

We project adjusted operating margin to expand from 21.1% in 2025 to roughly 24.5% in 2030, driven by volume leverage, pricing, cost savings, and favorable mix shift. We assume a weighted average cost of capital of 8.2%.

We believe that Hayward, a leading manufacturer of energy-efficient swimming pool equipment and pool automation systems, has a narrow moat attributable to customer switching costs and intangible assets.

Hayward derives roughly 85% of its revenue from aftermarket service and replacement parts, which are tied to its large installed base of equipment. While we estimate that pool equipment usually accounts for only around 10% of the installed cost of a swimming pool, it performs a vital function in the ongoing operation of the pool. Around 50% of Hayward’s aftermarket sales are nondiscretionary, as broken pumps or filters typically have to be replaced within 72 hours for the swimming pool to remain operable. As such, a reputation for quality and reliability is paramount, resulting in a loyal customer base, as pool owners tend to either replace equipment like-for-like or upgrade to newer equipment from the same manufacturer. Not only do robust aftermarket sales make revenue less cyclical, but they also reduce Hayward’s reliance on new construction starts, as the bulk of the firm’s revenue is derived from the large existing market of over 5 million installed swimming pools in the United States. As of 2025, Hayward generated roughly 79% of its sales in the US.

We believe that Hayward is well positioned to capitalize on customers upgrading their pool pads, thanks to its competitive position in variable speed pumps, heaters, LED lights, and automation solutions. Variable-speed pumps can cut electricity consumption by up to 90%, significantly reducing customers' utility bills. Adoption of variable-speed pumps has been accelerated by an Energy Department regulation, which became effective in July 2021, establishing minimum energy efficiency for swimming pool pumps. This has been a tailwind for Hayward’s revenue growth as variable-speed pumps can be 2-2.5 times more expensive than single-speed pumps.

Furthermore, we think that Hayward’s automation platform, Omni, has the potential to reinforce customer switching costs. Omni connects multiple pool devices and allows owners to remotely monitor and control their pools (including variable-speed pumps, LED lights, water temperature, and sanitization) from a smartphone app. Pool owners can also use the Omni app to communicate with pool servicers regarding maintenance and equipment issues, which we expect to further increase stickiness by making it easier to order replacement parts from Hayward.

We believe that Hayward is well positioned to continue increasing the value of its content per pool pad by offering automation solutions, energy-efficient products, and software-enabled devices. We estimate that the content opportunity on smart pool pads can be 3 times higher than in legacy swimming pools. Furthermore, we think that connected solutions have the potential to reinforce switching costs in the pool business, as we believe that offering an ecosystem that integrates multiple Hayward products and allows customers to remotely monitor and control their pools will enhance customer loyalty.

The company also has strong intangible assets, including its brand name, patent portfolio, and multidecade relationships with channel partners. Hayward is a leader in Omni controls, variable-speed pumps, and salt chlorine generators. The firm’s innovation spending has been focused on sustainable solutions, as nearly 90% of Hayward’s products are designed to be energy efficient, reduce chlorine use, and conserve water. We believe that the Omni app will help strengthen the Hayward brand by increasing visibility, as customers use the app regularly during the pool season. The company has a strong record of implementing price increases to offset cost inflation and has consistently generated adjusted operating margins in the mid-20s.

Hayward is a pure-play swimming pool equipment company poised to benefit from demand for sustainable and energy-efficient water solutions.

The pool business continues to deliver solid revenue growth and lucrative operating margins.

We expect Omni to reinforce customer switching costs by integrating multiple Hayward products under the same ecosystem.

Hayward faces short-term headwinds as volume reverts to normal levels following record sales during the pandemic.

Adverse macroeconomic conditions could have a negative impact on consumer spending on swimming pool equipment.

Cost inflation could be a headwind in the short run.