MKM Partners Initiate Coverage On Pentair

MKM Partneres Initiate coverage on Pentair PNR with a Neutral rating and $37 PT. Cyclical recovery under way, but water super-cycle likely to build over time. MKM would not look for an expansion of the company's premium water/growth multiple or a step-function acceleration in organic growth around a water super-cycle. Coupled with reasonable earnings expectations based on near-term visibility, shares appear to offer a reasonable risk/reward balance. Our 2010 and 2011 EPS estimates of $1.96 and $2.33, respectively, are in line with consensus and are underpinned by solid top-line growth in the company's early cycle and international markets. We view consensus estimates as reasonable based on near-term visibility. This compares to the company's historical range of 6x-11x EV/EBITDA and contemplates a modest premium to the peer group at 8.3x EV/EBITDA, at which PNR typically trades. PNR closed Thursday at $33.94