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Flowserve (FLS) to Divest Gestra as Part of Restructuring
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Flowserve Corporation (FLS - Free Report) announced its decision to divest the Gestra AG business unit to Spirax-Sarco Engineering plc for €186 million ($198.4 million). The sale is part of Flowserve’s broader strategy to improve focus on core business, and optimize its product portfolio and manufacturing footprint.
Spirax-Sarco Engineering, a leading provider of steam system solutions, has signed a conditional sale and purchase agreement to acquire Gestra AG and associated businesses from Flowserve. The deal, subject to certain customary conditions, is expected to close during second-quarter 2017.
Gestra specializes in advanced industrial boiler control systems as well as the design, and production of valves and control systems for steam and fluid process control. Flowserve acquired Gestra AG in 2002 as part of the Invensys Flow Control buyout. Gestra generated revenues of about €92.5 million in 2016.
For over two years now, Flowserve has been grappling with macroeconomic woes. Over the past three months, the company’s shares have lost 1.1%, in stark contrast to the Zacks categorized Machinery-General Industrial industry’s average positive return of 7.3%.
Capital spending constraints and aftermarket push outs have been the primary headwinds to the company’s growth. The company’s operations also suffered from project delays, rolling maintenance deferrals and extended timelines for both order placement and delivery acceptance.
Further, capital budgets are expected to remain under pressure for the first half of 2017. Flowserve warned investors that first-quarter 2017 results are likely to be the worst hit by seasonal factors like lower beginning backlog, loss of top-line leverage, increased under-absorption and higher selling and administrative expense.
In fact, any benefits accruing from internal streamlining initiatives are anticipated to be offset by weak revenues and pressure on margins.
The stock has also been attracting some negative analyst attention, of late. Over the past couple of months, analysts have become decidedly bearish on the stock, with estimates moving south. With nine downward revisions compared with none upward in the past 60 days, the Zacks Consensus Estimate for fiscal 2017 declined 18.4% to $1.77.
With slowdown in key geographies, overall chemical and power markets weakness, waning maintenance works and dearth of large projects, we believe this Zacks Rank #5 (Strong Sell) company is likely to remain under pressure in the times to come.
Illinois Tool Works managed to beat estimates each time in the past four quarters, for a positive earnings surprise of 2.2%.
Barnes Group has a solid earnings surprise history for the trailing four quarters, having beaten estimates thrice, for an average beat of 4.4%.
Middleby Corporation beat earnings in each of the trailing four quarters, resulting in an average surprise of 15.9%.
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Note: €1= $1.0667
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Flowserve (FLS) to Divest Gestra as Part of Restructuring
Flowserve Corporation (FLS - Free Report) announced its decision to divest the Gestra AG business unit to Spirax-Sarco Engineering plc for €186 million ($198.4 million). The sale is part of Flowserve’s broader strategy to improve focus on core business, and optimize its product portfolio and manufacturing footprint.
Spirax-Sarco Engineering, a leading provider of steam system solutions, has signed a conditional sale and purchase agreement to acquire Gestra AG and associated businesses from Flowserve. The deal, subject to certain customary conditions, is expected to close during second-quarter 2017.
Gestra specializes in advanced industrial boiler control systems as well as the design, and production of valves and control systems for steam and fluid process control. Flowserve acquired Gestra AG in 2002 as part of the Invensys Flow Control buyout. Gestra generated revenues of about €92.5 million in 2016.
For over two years now, Flowserve has been grappling with macroeconomic woes. Over the past three months, the company’s shares have lost 1.1%, in stark contrast to the Zacks categorized Machinery-General Industrial industry’s average positive return of 7.3%.
Capital spending constraints and aftermarket push outs have been the primary headwinds to the company’s growth. The company’s operations also suffered from project delays, rolling maintenance deferrals and extended timelines for both order placement and delivery acceptance.
Further, capital budgets are expected to remain under pressure for the first half of 2017. Flowserve warned investors that first-quarter 2017 results are likely to be the worst hit by seasonal factors like lower beginning backlog, loss of top-line leverage, increased under-absorption and higher selling and administrative expense.
In fact, any benefits accruing from internal streamlining initiatives are anticipated to be offset by weak revenues and pressure on margins.
The stock has also been attracting some negative analyst attention, of late. Over the past couple of months, analysts have become decidedly bearish on the stock, with estimates moving south. With nine downward revisions compared with none upward in the past 60 days, the Zacks Consensus Estimate for fiscal 2017 declined 18.4% to $1.77.
Flowserve Corporation Price and Consensus
Flowserve Corporation Price and Consensus | Flowserve Corporation Quote
With slowdown in key geographies, overall chemical and power markets weakness, waning maintenance works and dearth of large projects, we believe this Zacks Rank #5 (Strong Sell) company is likely to remain under pressure in the times to come.
Stocks to Consider
Better-ranked stocks in the broader sector include Illinois Tool Works Inc. (ITW - Free Report) , Barnes Group, Inc. (B - Free Report) and Middleby Corp. (MIDD - Free Report) . All three stocks hold a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Illinois Tool Works managed to beat estimates each time in the past four quarters, for a positive earnings surprise of 2.2%.
Barnes Group has a solid earnings surprise history for the trailing four quarters, having beaten estimates thrice, for an average beat of 4.4%.
Middleby Corporation beat earnings in each of the trailing four quarters, resulting in an average surprise of 15.9%.
Zacks’ Best Private Investment Ideas
In addition to the recommendations that are available to the public on our website, how would you like to follow all Zacks' private buys and sells in real time?
Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Starting today, for the next month, you can have unrestricted access. Click here for Zacks' private trades >>
Note: €1= $1.0667