Flowserve Corporation’s (FLS - Free Report) third-quarter 2023 adjusted earnings (excluding 15 cents from non-recurring items) of 50 cents per share beat the Zacks Consensus Estimate of earnings of 41 cents per share. The bottom line increased 455.6% year over year.
Results were primarily aided by high revenues. However, an increase in the cost of sales was a headwind, which seems to have turned investors bearish on the stock, which fell 1.5% following the earnings release on Oct 25.
Flowserve’s total sales of $1,094.7 million beat the consensus estimate of $1,020 million. The top line increased 25.4% year over year. Sales increased 23% on a constant-currency basis.
Aftermarket sales in the reported quarter increased 22.7% year over year (or up 20.4% on a constant-currency basis) to $565.5 million. Original equipment sales totaled $529.2 million, reflecting an increase of 28.4% (up 25.9% on a constant-currency basis).
Bookings totaled $1.07 billion in the quarter, reflecting a decrease of 12.7% (or 14.3% on a constant-currency basis) from the year-ago quarter. The backlog at the end of the reported quarter was $2.77 billion, up 6.6% year over year.
Segmental Details
The company currently has two reportable segments, which are the Flowserve Pump Division and the Flow Control Division. A brief discussion of the segments is provided below:
Revenues from the Flowserve Pump Division segment were $766.2 million, up 29.3% year over year. Bookings decreased 20.6% to $734.7 million. The segment’s operating income was $78.3 million for the quarter, up 101.3% year over year. Our estimate for the same was $76.9 million.
Revenues from the Flow Control Division segment were $330.7 million, up 17.0% year over year. Our estimate for segmental revenues was $297.7 million. Bookings of $330.5 million increased 10.2%. The segment operating income was $43.5 million for the quarter, up 46.5% year over year. Our estimate for the same was $35.0 million.Margin Profile
In the third quarter, Flowserve’s cost of sales increased 22.7% year over year to $777 million. Gross profit increased 32.6% to $317.7 million and the margin increased 160 basis points (bps) to 29.0%. Selling, general and administrative expenses were $252.1 million, up 14% year over year.
Operating income in the quarter increased 190.1% year over year to $70.3 million. The adjusted operating margin increased to 8.7%, up 630 bps year over year. The effective tax rate was (27.0%) in the quarter.
Balance Sheet and Cash Flow
Exiting the third quarter, Flowserve had cash and cash equivalents of $480.5 million compared with $435 million at the end of December 2022. Long-term debt (due after one year) was $1,266.4 million compared with $1,224.2 million at the end of December 2022.
In the first nine months of 2023, the company generated net cash of $131.1 million from operating activities against $109.5 million used in the year-ago period. Capital expenditure in the period totaled $47.5 million, up 3.7% from the year-ago period.
During the same time period, the company used $78.7 million for distributing dividends.
2023 Guidance Revised
Flowserve expects a 18.0-19.0% year-over-year increase in revenues in 2023 compared with 16.0-18.0% predicted before. The company anticipates reported earnings per share to be $1.40-$1.50. Adjusted earnings per share are estimated to be $1.95-$2.05 for the year compared with $1.85-$2.00 per expected earlier.
The midpoint of the guided range — $2.00 — lies above the Zacks Consensus Estimate of adjusted earnings of $1.98 per share. 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 & Stocks to Consider
FLS currently carries a Zacks Rank #3 (Hold). Some better-ranked companies from the Industrial Products sector are discussed below:
Applied Industrial Technologies, Inc. (AIT - Free Report) presently carries a Zacks Rank #2 (Buy) and a trailing four-quarter earnings surprise of 13.9%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
AIT’s earnings estimates have increased 2.8% for fiscal 2024 (ending June 2024) in the past 60 days. Shares of Applied Industrial have risen 21.2% in the past year.
Axon Enterprise, Inc. (AXON - Free Report) currently carries a Zacks Rank of 2. The company delivered a trailing four-quarter earnings surprise of approximately 60.2%, on average.
In the past 60 days, estimates for Axon’s earnings have remained steady for 2023. The stock has soared 38% 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 2023 earnings have increased 1.5%. The stock has gained 10.3% in the past year.
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Flowserve Corporation’s (FLS - Free Report) third-quarter 2023 adjusted earnings (excluding 15 cents from non-recurring items) of 50 cents per share beat the Zacks Consensus Estimate of earnings of 41 cents per share. The bottom line increased 455.6% year over year.
Results were primarily aided by high revenues. However, an increase in the cost of sales was a headwind, which seems to have turned investors bearish on the stock, which fell 1.5% following the earnings release on Oct 25.
Flowserve’s total sales of $1,094.7 million beat the consensus estimate of $1,020 million. The top line increased 25.4% year over year. Sales increased 23% on a constant-currency basis.
Aftermarket sales in the reported quarter increased 22.7% year over year (or up 20.4% on a constant-currency basis) to $565.5 million. Original equipment sales totaled $529.2 million, reflecting an increase of 28.4% (up 25.9% on a constant-currency basis).
Bookings totaled $1.07 billion in the quarter, reflecting a decrease of 12.7% (or 14.3% on a constant-currency basis) from the year-ago quarter. The backlog at the end of the reported quarter was $2.77 billion, up 6.6% year over year.
Segmental Details
The company currently has two reportable segments, which are the Flowserve Pump Division and the Flow Control Division. A brief discussion of the segments is provided below:
Revenues from the Flowserve Pump Division segment were $766.2 million, up 29.3% year over year. Bookings decreased 20.6% to $734.7 million. The segment’s operating income was $78.3 million for the quarter, up 101.3% year over year. Our estimate for the same was $76.9 million.
Revenues from the Flow Control Division segment were $330.7 million, up 17.0% year over year. Our estimate for segmental revenues was $297.7 million. Bookings of $330.5 million increased 10.2%. The segment operating income was $43.5 million for the quarter, up 46.5% year over year. Our estimate for the same was $35.0 million.Margin Profile
In the third quarter, Flowserve’s cost of sales increased 22.7% year over year to $777 million. Gross profit increased 32.6% to $317.7 million and the margin increased 160 basis points (bps) to 29.0%. Selling, general and administrative expenses were $252.1 million, up 14% year over year.
Operating income in the quarter increased 190.1% year over year to $70.3 million. The adjusted operating margin increased to 8.7%, up 630 bps year over year. The effective tax rate was (27.0%) in the quarter.
Balance Sheet and Cash Flow
Exiting the third quarter, Flowserve had cash and cash equivalents of $480.5 million compared with $435 million at the end of December 2022. Long-term debt (due after one year) was $1,266.4 million compared with $1,224.2 million at the end of December 2022.
In the first nine months of 2023, the company generated net cash of $131.1 million from operating activities against $109.5 million used in the year-ago period. Capital expenditure in the period totaled $47.5 million, up 3.7% from the year-ago period.
During the same time period, the company used $78.7 million for distributing dividends.
2023 Guidance Revised
Flowserve expects a 18.0-19.0% year-over-year increase in revenues in 2023 compared with 16.0-18.0% predicted before. The company anticipates reported earnings per share to be $1.40-$1.50. Adjusted earnings per share are estimated to be $1.95-$2.05 for the year compared with $1.85-$2.00 per expected earlier.
The midpoint of the guided range — $2.00 — lies above the Zacks Consensus Estimate of adjusted earnings of $1.98 per share. 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 & Stocks to Consider
FLS currently carries a Zacks Rank #3 (Hold). Some better-ranked companies from the Industrial Products sector are discussed below:
Applied Industrial Technologies, Inc. (AIT - Free Report) presently carries a Zacks Rank #2 (Buy) and a trailing four-quarter earnings surprise of 13.9%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
AIT’s earnings estimates have increased 2.8% for fiscal 2024 (ending June 2024) in the past 60 days. Shares of Applied Industrial have risen 21.2% in the past year.
Axon Enterprise, Inc. (AXON - Free Report) currently carries a Zacks Rank of 2. The company delivered a trailing four-quarter earnings surprise of approximately 60.2%, on average.
In the past 60 days, estimates for Axon’s earnings have remained steady for 2023. The stock has soared 38% 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 2023 earnings have increased 1.5%. The stock has gained 10.3% in the past year.
Research Chief 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.
This company targets millennial and Gen Z audiences, generating nearly $1 billion in revenue last quarter alone. A recent pullback makes now an ideal time to jump aboard. Of course, all our elite picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Nano-X Imaging which shot up +129.6% in little more than 9 months.
Free: See Our Top Stock And 4 Runners Up
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