Flowserve Corporation

Flowserve Corporation (FLS - Analyst Report) recently raised its full year guidance after sales rose 6% from the first quarter. The company has surprised on estimates 4 quarters in a row by an average of 7.84%. FLS has a forward P/E of 11.4.

Company Description

Flowserve manufactures fluid motion and control products and services including industrial pumps, seals and valves as well as other products related to flow management services. The company operates in more than 55 countries.

Flowserve Surprised By 6.08% in the Second Quarter

On July 29, Flowserve reported second quarter earnings which beat the Zacks Consensus Estimate by 11 cents. Earnings per share were $1.92, or 9% lower than a year ago.

Bookings increased quarter over quarter by 7% to $1.04 billion but that was 21% lower than the second quarter of 2008. The decrease was mainly due to the changes in the chemical, oil and gas markets due to the global recession. Customers also de-stocked inventory which led to a decline in business in the Flow Control Division.

Sales also fell 6% year over year to $1.09 billion but if negative currency fluctuations are excluded, then sales rose 4%. Compared to the first quarter, however, sales climbed 6%.

The decline in sales was attributable to lower sales by the Flow Control Division and the Flow Solutions Division although those declines were partially offset by increases in the Flowserve Pump Division.

Backlog decreased just 4% to $2.71 billion from $2.83 billion at the end of 2008. This included cancellations of $19 million of orders booked in the last year.

2009 Guidance Raised

Given the quarter over quarter increases in sales and bookings the company saw in the second quarter, it is raising its 2009 earnings per share guidance to the range of $7.15 to $7.75 from prior guidance of $6.75 to $7.50.

Flowserve is especially encouraged by its pump bookings since they may be an indicator that the end markets are starting to stabilize as pumps are ordered earlier than valves and seals due to their longer manufacturing lead times.

Zacks Consensus Estimates Rise

With the company's raised forecast, covering analysts moved to increase estimates for both the third quarter and the full year.

The third quarter Zacks Consensus Estimate rose 4 cents to $1.99 per share over the last week.

The 2009 Zacks Consensus Estimate jumped 19 cents to $7.50 per share, with 4 out of 7 analysts raising in the last 7 days.

Value Fundamentals

Flowserve is a Zacks #1 Rank (strong buy) stock. It has a price-to-book of 2.97 and a PEG ratio of 1.0. The company also has a solid 5-year average return on equity (ROE) of 15.52%. Additionally, it pays a dividend with a current yield of 1.30%.

Read the full analyst report on FLS