Flowserve Corporation’s (FLS - Free Report) second-quarter 2023 adjusted earnings (excluding 13 cents from non-recurring items) of 52 cents per share beat the Zacks Consensus Estimate of earnings of 40 cents per share. The bottom line increased 73.3% year over year.
Flowserve’s total sales of $1,080.4 million beat the consensus estimate of $981 million. The top line increased 22.5% year over year. Sales increased 22.9% on a constant-currency basis.
Aftermarket sales in the reported quarter increased 20% year over year (or up 19.5% on a constant-currency basis) to $562.6 million. Original equipment sales totaled $517.8 million, reflecting an increase of 29.5% (up 26.2% on a constant-currency basis).
Bookings totaled $1.11 billion in the quarter, reflecting an increase of 6.4% (or 6.6% on a constant-currency basis) from the year-ago quarter. The backlog at the end of the reported quarter was $2.8 billion, up 22.8% year over year.
Segmental Details
The company currently has two reportable segments, which are Flowserve Pump Division and Flow Control Division. A brief discussion of the segments is provided below:
Revenues from the Flowserve Pump Division segment were $765.4 million, up 24.5% year over year. Bookings increased 5.9% to $760.0 million. The segment operating income was $98.0 million for the quarter, up 71% year over year. Our estimate for the same was $80.5 million.
Revenues from the Flow Control Division segment were $317.7 million, up 18.4% year over year. Our estimate for segmental revenues was $293.3 million. Bookings of $359.7 million increased 9%. The segment operating income was $36.1 million for the quarter, up 18.8% year over year. Our estimate for the same was $29.6 million.
Margin Profile
In the second quarter, Flowserve’s cost of sales increased 19.8% year over year to $757.6 million. It represented 70.1% of sales, compared with 71.7% of sales in the year-ago quarter. Gross profit increased 29.2% to $322.8 million, and the margin increased 160 basis points (bps) to 29.9%. Selling, general and administrative expenses were $230.1 million, up 18.2% year over year. It represented 21.3% of sales.
Operating income in the quarter increased 60.2% year over year to $96.6 million. The adjusted operating margin increased to 10.4%, up 320 bps year over year. The effective tax rate was 27.9% in the quarter.
Balance Sheet and Cash Flow
Exiting the second quarter, Flowserve had cash and cash equivalents of $422.8 million, compared with $435 million at the end of December 2022. Long-term debt (due after one year) was $1,245.3 million, compared with $1,224.2 million at the end of December 2022.
In the first six months of 2023, the company generated net cash of $50.4 million from operating activities against $71.4 million used in the year-ago period. Capital expenditure in the period totaled $31.9 million, up 2.8% from the year-ago period.
During the same time period, the company used $52.5 million for distributing dividends.
2023 Guidance Improved
Flowserve expects a 16.0-18.0% year-over-year increase in revenues in 2023, compared with 10.0-12.0% predicted before. The company anticipates reported earnings per share to be $1.40-$1.65. Adjusted earnings per share are estimated to be $1.85-$2.00 for the year, compared with $1.65-$1.85 expected earlier. The Zacks Consensus Estimate for the same stands at $1.84. The adjusted tax rate is anticipated to be approximately 20%. The company expects net interest expense of approximately $60 million and capital expenditure of $75-$85 million for the year.
Zacks Rank & Other Stocks to Consider
FLS currently carries a Zacks Rank #2 (Buy). Some other top-ranked companies from the Industrial Products sector are discussed below:
Greif, Inc. (GEF - Free Report) presently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks.
GEF delivered a trailing four-quarter earnings surprise of 7.7%, on average. GEF’s earnings estimates have increased 13.4% for fiscal 2023 in the past 60 days. Its shares have risen 8.6% in the past year.
Caterpillar Inc. (CAT - Free Report) presently carries a Zacks Rank of 2. CAT’s earnings surprise in the last four quarters was 18.5%, on average.
In the past 60 days, estimates for Caterpillar’s earnings have increased 1.4% for 2023. The stock has gained 56.6% in the past year.
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Flowserve Corporation’s (FLS - Free Report) second-quarter 2023 adjusted earnings (excluding 13 cents from non-recurring items) of 52 cents per share beat the Zacks Consensus Estimate of earnings of 40 cents per share. The bottom line increased 73.3% year over year.
Flowserve’s total sales of $1,080.4 million beat the consensus estimate of $981 million. The top line increased 22.5% year over year. Sales increased 22.9% on a constant-currency basis.
Aftermarket sales in the reported quarter increased 20% year over year (or up 19.5% on a constant-currency basis) to $562.6 million. Original equipment sales totaled $517.8 million, reflecting an increase of 29.5% (up 26.2% on a constant-currency basis).
Bookings totaled $1.11 billion in the quarter, reflecting an increase of 6.4% (or 6.6% on a constant-currency basis) from the year-ago quarter. The backlog at the end of the reported quarter was $2.8 billion, up 22.8% year over year.
Segmental Details
The company currently has two reportable segments, which are Flowserve Pump Division and Flow Control Division. A brief discussion of the segments is provided below:
Revenues from the Flowserve Pump Division segment were $765.4 million, up 24.5% year over year. Bookings increased 5.9% to $760.0 million. The segment operating income was $98.0 million for the quarter, up 71% year over year. Our estimate for the same was $80.5 million.
Revenues from the Flow Control Division segment were $317.7 million, up 18.4% year over year. Our estimate for segmental revenues was $293.3 million. Bookings of $359.7 million increased 9%. The segment operating income was $36.1 million for the quarter, up 18.8% year over year. Our estimate for the same was $29.6 million.
Margin Profile
In the second quarter, Flowserve’s cost of sales increased 19.8% year over year to $757.6 million. It represented 70.1% of sales, compared with 71.7% of sales in the year-ago quarter. Gross profit increased 29.2% to $322.8 million, and the margin increased 160 basis points (bps) to 29.9%. Selling, general and administrative expenses were $230.1 million, up 18.2% year over year. It represented 21.3% of sales.
Operating income in the quarter increased 60.2% year over year to $96.6 million. The adjusted operating margin increased to 10.4%, up 320 bps year over year. The effective tax rate was 27.9% in the quarter.
Balance Sheet and Cash Flow
Exiting the second quarter, Flowserve had cash and cash equivalents of $422.8 million, compared with $435 million at the end of December 2022. Long-term debt (due after one year) was $1,245.3 million, compared with $1,224.2 million at the end of December 2022.
In the first six months of 2023, the company generated net cash of $50.4 million from operating activities against $71.4 million used in the year-ago period. Capital expenditure in the period totaled $31.9 million, up 2.8% from the year-ago period.
During the same time period, the company used $52.5 million for distributing dividends.
2023 Guidance Improved
Flowserve expects a 16.0-18.0% year-over-year increase in revenues in 2023, compared with 10.0-12.0% predicted before. The company anticipates reported earnings per share to be $1.40-$1.65. Adjusted earnings per share are estimated to be $1.85-$2.00 for the year, compared with $1.65-$1.85 expected earlier. The Zacks Consensus Estimate for the same stands at $1.84. The adjusted tax rate is anticipated to be approximately 20%. The company expects net interest expense of approximately $60 million and capital expenditure of $75-$85 million for the year.
Zacks Rank & Other Stocks to Consider
FLS currently carries a Zacks Rank #2 (Buy). Some other top-ranked companies from the Industrial Products sector are discussed below:
Greif, Inc. (GEF - Free Report) presently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks.
GEF delivered a trailing four-quarter earnings surprise of 7.7%, on average. GEF’s earnings estimates have increased 13.4% for fiscal 2023 in the past 60 days. Its shares have risen 8.6% in the past year.
Caterpillar Inc. (CAT - Free Report) presently carries a Zacks Rank of 2. CAT’s earnings surprise in the last four quarters was 18.5%, on average.
In the past 60 days, estimates for Caterpillar’s earnings have increased 1.4% for 2023. The stock has gained 56.6% in the past year.
Zacks Names #1 Semiconductor Stock
It's only 1/9,000th the size of NVIDIA which skyrocketed more than +800% since we recommended it. NVIDIA is still strong, but our new top chip stock has much more room to boom.
With strong earnings growth and an expanding customer base, it's positioned to feed the rampant demand for Artificial Intelligence, Machine Learning, and Internet of Things. Global semiconductor manufacturing is projected to explode from $452 billion in 2021 to $803 billion by 2028.
See This Stock Now for Free >>
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