Latham Group’s Q1 Loss Masks Margin Gains

Forward-Looking Analysis

Wall Street consensus anticipates Latham Group to report earnings per share (EPS) of $0.16 for the second quarter of 2026, against revenue estimates of $190.5 million. This follows a full-year 2026 EPS forecast of $0.17 on revenues of $594 million. Analyst projections indicate a robust long-term trajectory, with 10 analysts forecasting average EPS growth of 84.45% annually through 2028, reaching $0.33 by 2028. Revenue is expected to grow at a more moderate 7.76% rate, hitting $680.2 million by 2028. Current analyst ratings are split, with one Strong Buy, one Hold, and one Sell recommendation among three covering analysts, resulting in a consensus "Hold." The average 12-month price target is $7.50, implying a 39.93% upside from current levels, with a range between $6.00 and $9.50. Estimates have shown mixed revisions recently, maintaining a Zacks Rank #3. Return on equity is forecast to remain low at 9.66%, and return on assets at 4.47%, both trailing industry averages.

Historical Performance Review

Latham Group reported a challenging first quarter of 2026, posting a net loss of $8.53 million and an EPS of -$0.07. Revenue came in at $117.31 million, with a gross profit of $37.16 million. The company missed the Zacks consensus EPS estimate of -$0.05 by $0.01, resulting in a -33.33% earnings surprise, while also narrowly missing revenue estimates by 0.58% compared to year-ago figures of $111.42 million. Despite the loss, year-over-year sales growth was achieved across all three product lines, and gross margins expanded by 220 basis points due to volume leverage and lean manufacturing.

Additional News

Latham Group announced the completion of its acquisition of Freedom Pools on February 26, 2026, integrating the fiberglass pool manufacturer into its Australia and New Zealand operations. The $17 million transaction is expected to be immediately accretive, adding $20 million in annualized net sales and $4 million in adjusted EBITDA. Management highlighted the strategic entry into Western Australia and the dual-brand strategy with existing Narellan Pools. The company also confirmed its Q2 2026 earnings release for August 4, 2026. In Q1, CEO Sean Gadd noted positive sales trends in Florida and double-digit growth in the "sand state" strategy. The stock has underperformed the S&P 500 year-to-date, dropping 8.7% compared to the index's 5.2% gain. Management is scheduled to participate in investor conferences in May and June 2026 to discuss these growth initiatives.

Summary & Outlook

Latham Group faces near-term profitability pressures, evidenced by the Q1 2026 net loss, yet demonstrates strong underlying operational improvements with significant gross margin expansion. The acquisition of Freedom Pools provides a clear catalyst for long-term revenue growth and geographic diversification in the Asia-Pacific region. While analyst consensus remains cautious with a "Hold" rating, the projected 84.45% annual earnings growth rate suggests significant upside potential if margin trends persist. The outlook is cautiously neutral-to-bullish, dependent on management’s ability to integrate acquisition synergies and sustain volume leverage amidst broader market volatility.