What Happened?

Shares of residential swimming pool manufacturer Latham (NASDAQ:SWIM) fell 15.1% in the morning session after the company reported disappointing third-quarter earnings. Sales missed analyst expectations during the quarter. The company experienced lower sales volumes, attributed to softer industry conditions and a challenging macroeconomic environment. Given the weak operating conditions, management lowered full-year revenue and EBITDA guidance. Overall, this was a weak quarter highlighting challenges that need to be swiftly tackled.

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What The Market Is Telling Us

Latham’s shares are extremely volatile and have had 50 moves greater than 5% over the last year. But moves this big are rare even for Latham and indicate this news significantly impacted the market’s perception of the business. 

The biggest move we wrote about over the last year was 6 months ago when the stock gained 25.4% on the news that the company reported first-quarter results that blew past analysts' revenue, adjusted EBITDA, and EPS expectations. However, revenue declined in absolute terms, and this was attributed to continued difficult economic conditions, lower backlog, and normalized seasonality. The weak demand partly explains the decline in-ground pool sales, which represents its largest operating segment. Despite these challenges, management reaffirmed full-year revenue guidance, highlighting the resilience to power through the difficult demand environment. Zooming out, we think this was a great quarter that shareholders will appreciate.

Latham is up 130% since the beginning of the year, but at $5.74 per share, it is still trading 19.9% below its 52-week high of $7.17 from October 2024. Investors who bought $1,000 worth of Latham’s shares at the IPO in April 2021 would now be looking at an investment worth $210.64.

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