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Will Flowserve (FLS) Continue Dismal Earnings Trend in Q3?
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Flowserve Corp. (FLS - Free Report) is set to report third-quarter 2016 results, after the closing bell on Oct 27.
The Texas-based company’s earnings have had a choppy run in recent times. Flowserve’s earnings have missed the Zacks Consensus Estimate thrice in the trailing four quarters, with an average negative surprise of 3%.
In the last reported quarter, the company delivered a negative earnings surprise of 6.6%.
Let’s see how things are shaping up for this announcement.
Factors to Consider
Flowserve boasts a diversified mix of products, end markets and geographies, and foresees huge prospects in its investment projects on a global platform. However, the company’s growth has decidedly been under pressure in recent times.
Much of Flowserve’s recent lukewarm financial performance is attributable to the unfavorable macroeconomic conditions like adverse currency effects, volatility in oil & gas sector and decelerating economic growth in certain emerging markets. Its financials have been hurt by foreign currency translations in recent quarters and we believe it will put pressure on the results of the quarter under review as well. Further, broad-based capital spending decline, resulting from the continued slowdown in global industrial markets, has added to the problems.
In addition, Flowserve’s realignment strategies — although beneficial in the long term — will likely weigh on its financials in the third quarter.
As over two-third of the company’s revenues are sourced internationally, uncertainty in the broader macro environment, including Europe, Asia-Pacific, North America, the Middle East and Latin America, has been exerting persistent pressure on Flowserve’s financials over the past few quarters. These trends are likely to continue in the to-be reported quarter as well.
On the other hand, Flowserve’s robust operating culture – “One Flowserve” – armed with a strong and collaborative management team is anticipated to offset some of the aforementioned challenges. Its restructuring initiatives are also expected to unlock some savings and support the bottom line.
Our proven model does not conclusively show that Flowserve will beat earnings estimates in this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) for this to happen. But that is not the case here as you will see below.
Zacks ESP: The Earnings ESP for Flowserve is currently pegged at -1.64%. This is because the Most Accurate estimate of 60 cents stands below the Zacks Consensus Estimate of 61 cents.
Zacks Rank: Flowserve currently has a Zacks Rank #4 (Sell). Note that we caution against stocks with Zacks Rank #4 or #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks That Warrant a Look
Here are some companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:
Entergy Corporation (ETR - Free Report) has an Earnings ESP of +8.07% and a Zacks Rank #2. The company will report results on Oct 25.
E. I. du Pont de Nemours and Company (DD - Free Report) has an Earnings ESP of +9.52% and a Zacks Rank #3. The company is expected to release earnings results on Oct 25.
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Will Flowserve (FLS) Continue Dismal Earnings Trend in Q3?
Flowserve Corp. (FLS - Free Report) is set to report third-quarter 2016 results, after the closing bell on Oct 27.
The Texas-based company’s earnings have had a choppy run in recent times. Flowserve’s earnings have missed the Zacks Consensus Estimate thrice in the trailing four quarters, with an average negative surprise of 3%.
In the last reported quarter, the company delivered a negative earnings surprise of 6.6%.
Let’s see how things are shaping up for this announcement.
Factors to Consider
Flowserve boasts a diversified mix of products, end markets and geographies, and foresees huge prospects in its investment projects on a global platform. However, the company’s growth has decidedly been under pressure in recent times.
Much of Flowserve’s recent lukewarm financial performance is attributable to the unfavorable macroeconomic conditions like adverse currency effects, volatility in oil & gas sector and decelerating economic growth in certain emerging markets. Its financials have been hurt by foreign currency translations in recent quarters and we believe it will put pressure on the results of the quarter under review as well. Further, broad-based capital spending decline, resulting from the continued slowdown in global industrial markets, has added to the problems.
In addition, Flowserve’s realignment strategies — although beneficial in the long term — will likely weigh on its financials in the third quarter.
As over two-third of the company’s revenues are sourced internationally, uncertainty in the broader macro environment, including Europe, Asia-Pacific, North America, the Middle East and Latin America, has been exerting persistent pressure on Flowserve’s financials over the past few quarters. These trends are likely to continue in the to-be reported quarter as well.
On the other hand, Flowserve’s robust operating culture – “One Flowserve” – armed with a strong and collaborative management team is anticipated to offset some of the aforementioned challenges. Its restructuring initiatives are also expected to unlock some savings and support the bottom line.
FLOWSERVE CORP Price and EPS Surprise
FLOWSERVE CORP Price and EPS Surprise | FLOWSERVE CORP Quote
Earnings Whispers
Our proven model does not conclusively show that Flowserve will beat earnings estimates in this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) for this to happen. But that is not the case here as you will see below.
Zacks ESP: The Earnings ESP for Flowserve is currently pegged at -1.64%. This is because the Most Accurate estimate of 60 cents stands below the Zacks Consensus Estimate of 61 cents.
Zacks Rank: Flowserve currently has a Zacks Rank #4 (Sell). Note that we caution against stocks with Zacks Rank #4 or #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks That Warrant a Look
Here are some companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:
The Earnings ESP for WEC Energy Group, Inc. (WEC - Free Report) is +5.09% and it carries a Zacks Rank #2. The company is expected to release its quarterly results on Oct 26. You can see the complete list of today’s Zacks #1 Rank stocks here.
Entergy Corporation (ETR - Free Report) has an Earnings ESP of +8.07% and a Zacks Rank #2. The company will report results on Oct 25.
E. I. du Pont de Nemours and Company (DD - Free Report) has an Earnings ESP of +9.52% and a Zacks Rank #3. The company is expected to release earnings results on Oct 25.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>