Flowserve Corporation (FLS - Free Report) reported weaker-than-expected first-quarter 2022 results, wherein earnings and sales missed estimates by 66.7% and 4.5%, respectively.
In the reported quarter, the machinery company’s adjusted earnings were 7 cents per share, lagging the Zacks Consensus Estimate of 21 cents. The bottom line decreased 75% from the year-ago figure of 28 cents due to lower sales.
Revenue Details
In the first quarter, Flowserve’s sales were $821.1 million, reflecting a year-over-year decline of 4.2%. The metric was down 2% on a constant currency basis.
The company’s top line missed the Zacks Consensus Estimate of $859 million.
Aftermarket sales in the reported quarter were down 2.8% year over year (or down 0.4% on a constant-currency basis) to $437.9 million. Original equipment sales totaled $383.2 million, reflecting a decrease of 5.8% (or down 3.8% on a constant-currency basis).
Bookings totaled $1.09 billion in the quarter, reflecting an increase of 14.9% (or 17.6% on a constant-currency basis) from the year-ago quarter. Backlog at the end of the reported quarter was $2.23 billion.
The company currently has two reportable segments — Flowserve Pump Division and Flow Control Division. A brief discussion of the segments is provided below:
Revenues from the Flowserve Pump Division were $575.6 million, decreasing 4.5% year over year or 2.1% on a constant-currency basis. Bookings rose 21.7% to $795.6 million.
Revenues from the Flow Control Division were $247.9 million, decreasing 3.1% year over year or 1.2% on a constant-currency basis. Bookings of $294.3 million increased 0.1%.
Margin Profile
In the first quarter, Flowserve’s cost of sales increased 0.8% year over year to $611.4 million. It represented 74.5% of sales compared with 70.7% in the year-ago quarter. Gross profit decreased 16.4% to $209.6 million, and margin contracted 120 basis points (bps) to 25.5%. Selling, general and administrative expenses were $206.1 million, up 3.9% year over year. It represented 25.1% of sales.
Adjusted operating income in the quarter decreased 61% year over year to $27.2 million. Adjusted operating margin fell 480 bps to 3.3%. Net interest and other expenses (adjusted) declined 32.2% to $12.2 million. Effective tax rate was 22.2% compared with 23.2% in the year-ago quarter.
Balance Sheet and Cash Flow
Exiting the first quarter, Flowserve had cash and cash equivalents of $575.8 million, down from $658.5 million at the previous quarter-end. Long-term debt was $1,251.6 million, down 0.8% on a sequential basis.
In the first three months of 2022, it used net cash of $26.8 million from operating activities versus $36.4 million generated in the year-ago period. Capital expenditure in the period totaled $14.1 million, increasing 23.7% from $11.4 million spent a year ago.
During the first three months of the year, the company used $26.1 million for distributing dividends and refrained from repurchasing shares.
Outlook
For 2022, the company expects revenues to grow 5-7% year over year compared with a rise of 7-9% guided earlier. It predicts adjusted earnings per share in the range of $1.50-$1.70, lower than $1.70-$1.90 estimated previously. For the year, the adjusted tax rate is expected to be 20-22%.
For the year, its interest expense (net) is anticipated to be $45-$50 million, while capital expenditures are likely to be $60-$70 million.
Zacks Rank & Stocks to Consider
The company currently carries a Zacks Rank #3 (Hold).
Some better-ranked companies are discussed below.
AZZ Inc. (AZZ - Free Report) presently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here. Its earnings surprise for the last four quarters was 22.3%, on average.
AZZ’s earnings estimates increased 12.6% for fiscal 2022 (ending February 2022) in the past 60 days. Its shares have lost 4.9% in the past three months.
Graphic Packaging Holding Company (GPK - Free Report) presently sports a Zacks Rank #1. Its earnings surprise in the last four quarters was 7.2%, on average.
In the past 60 days, GPK’s earnings estimates have increased 8.1% for 2022. The stock has rallied 17.5% in the past three months.
Ferguson plc (FERG - Free Report) presently carries a Zacks Rank of 2 (Buy). FERG delivered a trailing four-quarter earnings surprise of 14.2%, on average.
Earnings estimates of Ferguson have increased 6.5% for fiscal 2022 (ending July 2022) in the past 60 days. FERG’s shares have declined 18.1% in the past three months.
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Flowserve Corporation (FLS - Free Report) reported weaker-than-expected first-quarter 2022 results, wherein earnings and sales missed estimates by 66.7% and 4.5%, respectively.
In the reported quarter, the machinery company’s adjusted earnings were 7 cents per share, lagging the Zacks Consensus Estimate of 21 cents. The bottom line decreased 75% from the year-ago figure of 28 cents due to lower sales.
Revenue Details
In the first quarter, Flowserve’s sales were $821.1 million, reflecting a year-over-year decline of 4.2%. The metric was down 2% on a constant currency basis.
The company’s top line missed the Zacks Consensus Estimate of $859 million.
Aftermarket sales in the reported quarter were down 2.8% year over year (or down 0.4% on a constant-currency basis) to $437.9 million. Original equipment sales totaled $383.2 million, reflecting a decrease of 5.8% (or down 3.8% on a constant-currency basis).
Bookings totaled $1.09 billion in the quarter, reflecting an increase of 14.9% (or 17.6% on a constant-currency basis) from the year-ago quarter. Backlog at the end of the reported quarter was $2.23 billion.
The company currently has two reportable segments — Flowserve Pump Division and Flow Control Division. A brief discussion of the segments is provided below:
Revenues from the Flowserve Pump Division were $575.6 million, decreasing 4.5% year over year or 2.1% on a constant-currency basis. Bookings rose 21.7% to $795.6 million.
Revenues from the Flow Control Division were $247.9 million, decreasing 3.1% year over year or 1.2% on a constant-currency basis. Bookings of $294.3 million increased 0.1%.
Margin Profile
In the first quarter, Flowserve’s cost of sales increased 0.8% year over year to $611.4 million. It represented 74.5% of sales compared with 70.7% in the year-ago quarter. Gross profit decreased 16.4% to $209.6 million, and margin contracted 120 basis points (bps) to 25.5%. Selling, general and administrative expenses were $206.1 million, up 3.9% year over year. It represented 25.1% of sales.
Adjusted operating income in the quarter decreased 61% year over year to $27.2 million. Adjusted operating margin fell 480 bps to 3.3%. Net interest and other expenses (adjusted) declined 32.2% to $12.2 million. Effective tax rate was 22.2% compared with 23.2% in the year-ago quarter.
Balance Sheet and Cash Flow
Exiting the first quarter, Flowserve had cash and cash equivalents of $575.8 million, down from $658.5 million at the previous quarter-end. Long-term debt was $1,251.6 million, down 0.8% on a sequential basis.
In the first three months of 2022, it used net cash of $26.8 million from operating activities versus $36.4 million generated in the year-ago period. Capital expenditure in the period totaled $14.1 million, increasing 23.7% from $11.4 million spent a year ago.
During the first three months of the year, the company used $26.1 million for distributing dividends and refrained from repurchasing shares.
Outlook
For 2022, the company expects revenues to grow 5-7% year over year compared with a rise of 7-9% guided earlier. It predicts adjusted earnings per share in the range of $1.50-$1.70, lower than $1.70-$1.90 estimated previously. For the year, the adjusted tax rate is expected to be 20-22%.
For the year, its interest expense (net) is anticipated to be $45-$50 million, while capital expenditures are likely to be $60-$70 million.
Zacks Rank & Stocks to Consider
The company currently carries a Zacks Rank #3 (Hold).
Some better-ranked companies are discussed below.
AZZ Inc. (AZZ - Free Report) presently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here. Its earnings surprise for the last four quarters was 22.3%, on average.
AZZ’s earnings estimates increased 12.6% for fiscal 2022 (ending February 2022) in the past 60 days. Its shares have lost 4.9% in the past three months.
Graphic Packaging Holding Company (GPK - Free Report) presently sports a Zacks Rank #1. Its earnings surprise in the last four quarters was 7.2%, on average.
In the past 60 days, GPK’s earnings estimates have increased 8.1% for 2022. The stock has rallied 17.5% in the past three months.
Ferguson plc (FERG - Free Report) presently carries a Zacks Rank of 2 (Buy). FERG delivered a trailing four-quarter earnings surprise of 14.2%, on average.
Earnings estimates of Ferguson have increased 6.5% for fiscal 2022 (ending July 2022) in the past 60 days. FERG’s shares have declined 18.1% in the past three months.
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
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