Flowserve Corporation (FLS - Free Report) reported better-than-expected bottom-line results for the third quarter of 2018, delivering a positive earnings surprise of 16.7%.
This machinery company’s adjusted earnings were 49 cents per share, surpassing the Zacks Consensus Estimate of 42 cents. Moreover, the bottom line increased 32.4% from the year-ago figure of 37 cents, primarily on the back of sales growth.
Segmental Performance Drives Revenues
In the quarter under review, Flowserve’s sales were $952.7 million, reflecting growth of 7.8% from the year-ago quarter. Notably, the sales growth was partially offset by 1% negative impact from divested businesses.
Moreover, the top line surpassed the Zacks Consensus Estimate of $921 million by 3.4%.
Aftermarket sales in the reported quarter grew 3.9% year over year (or 5% on a constant-currency basis) to $457 million. Furthermore, original equipment sales totaled $496 million, reflecting growth of 11.8% (or 12.5% on a constant-currency basis).
Bookings totaled more than $1 billion, reflecting growth of 13.2% from the year-ago quarter. Backlog at the end of the reported quarter was $1.9 billion, reflecting an increase of 1.4% sequentially.
The company reports its net sales in three segments, a brief discussion of those are provided below:
Revenues from the Engineered Product Division were $466.2 million, increasing 9.9% year over year or 10.3% on a constant-currency basis. Bookings increased 20.2% to $519.8 million.
Revenues from the Industrial Product Division totaled $199.1 million, increasing 5% year over year or 6.1% on a constant-currency basis. Bookings were solid in the quarter under review, increasing 1.5% to $199.8 million.
Revenues from the Flow Control Division were $306.2 million, increasing 6.4% year over year or 7.9% on a constant-currency basis. Bookings of $314.2 million jumped 9.9%.
Margin Profile
In the quarter under review, Flowserve’s adjusted cost of sales increased 4.7% year over year to $644.2 million. It represented 67.6% of sales compared with 69.7% in the year-ago quarter. Adjusted gross margin increased 130 basis points (bps) to 33.2%. Selling, general and administrative expenses increased 17.4% to $241.9 million. It represented 25.4% of sales.
Adjusted operating income in the quarter under review increased 26.5% year over year to $105 million. Moreover, adjusted operating margin grew 160 bps to 11%. Effective tax rate was 28.8% compared with 27% in the year-ago quarter.
Balance Sheet and Cash Flow
Exiting the third quarter, Flowserve had cash and cash equivalents of $529.9 million, up 2.4% from $517.4 million at the end of the last-reported quarter. Long-term debt balance decreased 1.3% sequentially to $1,436.7 million.
In the first nine months of 2018, the company generated net cash of $26.3 million its from operating activities compared with $72.4 million in the year-ago period. Capital expenditure amounted to almost $50 million compared with $40.6 million in the first nine months of 2017.
During the first three quarters of 2018, the company used $74.5 million for distributing dividends.
Outlook
Flowserve is progressing well with its transformation initiatives. The multi-year Flowserve 2.0 strategy will help in simplifying the operating model and spur growth.
The company currently expects adjusted earnings per share in the range of $1.65-$1.75 compared with the earlier guided range of $1.50-$1.70. Revenues are currently projected to increase 5-7% compared with previous forecast of 3-6% growth. Adjusted tax rate for the year is predicted to be 27-28%.
Zacks Rank & Other Key Picks
Flowserve currently carries a Zacks Rank #2 (Buy).
Some other top-ranked stocks in the same space are Atkore International Group Inc. (ATKR - Free Report) , Donaldson Company, Inc. (DCI - Free Report) and Cintas Corporation (CTAS - Free Report) . While Atkore International Group sports a Zacks Rank #1 (Strong Buy), Donaldson and Cintas carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Atkore International Group surpassed estimates thrice in the trailing four quarters, the average beat being 24.46%.
Donaldson exceeded estimates twice in the trailing four quarters, the average beat being 2.29%.
Cintas surpassed estimates in each of the trailing four quarters, the average beat being 7.22%.
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Flowserve Corporation (FLS - Free Report) reported better-than-expected bottom-line results for the third quarter of 2018, delivering a positive earnings surprise of 16.7%.
This machinery company’s adjusted earnings were 49 cents per share, surpassing the Zacks Consensus Estimate of 42 cents. Moreover, the bottom line increased 32.4% from the year-ago figure of 37 cents, primarily on the back of sales growth.
Segmental Performance Drives Revenues
In the quarter under review, Flowserve’s sales were $952.7 million, reflecting growth of 7.8% from the year-ago quarter. Notably, the sales growth was partially offset by 1% negative impact from divested businesses.
Moreover, the top line surpassed the Zacks Consensus Estimate of $921 million by 3.4%.
Aftermarket sales in the reported quarter grew 3.9% year over year (or 5% on a constant-currency basis) to $457 million. Furthermore, original equipment sales totaled $496 million, reflecting growth of 11.8% (or 12.5% on a constant-currency basis).
Bookings totaled more than $1 billion, reflecting growth of 13.2% from the year-ago quarter. Backlog at the end of the reported quarter was $1.9 billion, reflecting an increase of 1.4% sequentially.
The company reports its net sales in three segments, a brief discussion of those are provided below:
Revenues from the Engineered Product Division were $466.2 million, increasing 9.9% year over year or 10.3% on a constant-currency basis. Bookings increased 20.2% to $519.8 million.
Revenues from the Industrial Product Division totaled $199.1 million, increasing 5% year over year or 6.1% on a constant-currency basis. Bookings were solid in the quarter under review, increasing 1.5% to $199.8 million.
Revenues from the Flow Control Division were $306.2 million, increasing 6.4% year over year or 7.9% on a constant-currency basis. Bookings of $314.2 million jumped 9.9%.
Margin Profile
In the quarter under review, Flowserve’s adjusted cost of sales increased 4.7% year over year to $644.2 million. It represented 67.6% of sales compared with 69.7% in the year-ago quarter. Adjusted gross margin increased 130 basis points (bps) to 33.2%. Selling, general and administrative expenses increased 17.4% to $241.9 million. It represented 25.4% of sales.
Adjusted operating income in the quarter under review increased 26.5% year over year to $105 million. Moreover, adjusted operating margin grew 160 bps to 11%. Effective tax rate was 28.8% compared with 27% in the year-ago quarter.
Balance Sheet and Cash Flow
Exiting the third quarter, Flowserve had cash and cash equivalents of $529.9 million, up 2.4% from $517.4 million at the end of the last-reported quarter. Long-term debt balance decreased 1.3% sequentially to $1,436.7 million.
In the first nine months of 2018, the company generated net cash of $26.3 million its from operating activities compared with $72.4 million in the year-ago period. Capital expenditure amounted to almost $50 million compared with $40.6 million in the first nine months of 2017.
During the first three quarters of 2018, the company used $74.5 million for distributing dividends.
Outlook
Flowserve is progressing well with its transformation initiatives. The multi-year Flowserve 2.0 strategy will help in simplifying the operating model and spur growth.
The company currently expects adjusted earnings per share in the range of $1.65-$1.75 compared with the earlier guided range of $1.50-$1.70. Revenues are currently projected to increase 5-7% compared with previous forecast of 3-6% growth. Adjusted tax rate for the year is predicted to be 27-28%.
Zacks Rank & Other Key Picks
Flowserve currently carries a Zacks Rank #2 (Buy).
Some other top-ranked stocks in the same space are Atkore International Group Inc. (ATKR - Free Report) , Donaldson Company, Inc. (DCI - Free Report) and Cintas Corporation (CTAS - Free Report) . While Atkore International Group sports a Zacks Rank #1 (Strong Buy), Donaldson and Cintas carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Atkore International Group surpassed estimates thrice in the trailing four quarters, the average beat being 24.46%.
Donaldson exceeded estimates twice in the trailing four quarters, the average beat being 2.29%.
Cintas surpassed estimates in each of the trailing four quarters, the average beat being 7.22%.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
See the pot trades we're targeting>>
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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