Pentair's (PNR) Q4 results were in line and Q1 guidance was consistent with seasonality, but the company is staying conservative on its 2026 guidance, assuming flat residential volumes throughout the year, RBC Capital Markets said in a note Tuesday.

The brokerage said this conservative outlook makes it a "key swing factor" if residential volumes improve.

The company also continues to benefit from its transformation strategy, with management saying "transformation is a long way from over" and indicating a runway for savings and operational efficiencies beyond 2026, according to the note.

Market sentiment is cautious, believing that current changes may stop cost benefits by the end of 2026, the note said.

The brokerage lowered its 2026 earnings estimates to $5.30 from $5.35 previously, while awaiting more details on longer-term initiatives when the company holds its investor day on March 4.

RBC maintained its outperform rating on the stock and lowered its price target to $117 from $124.

Shares of Pentair were up 3.6% in recent trading Wednesday.

Price: 98.18, Change: +3.39, Percent Change: +3.58