Flowserve Corporation (FLS - Free Report) reported better-than-expected results for the first quarter of 2019, with a positive earnings surprise of 20.6%. However, sales lagged estimates by 5.2%.
This machinery company’s adjusted earnings in the reported quarter were 41 cents per share, surpassing the Zacks Consensus Estimate of 34 cents. Further, the bottom line increased 51.9% from the year-ago figure of 27 cents on the back of benefits from transformation initiatives.
Weak Pump Division Lowers Revenues
In the quarter under review, Flowserve’s sales were $890.1 million, reflecting a year-over-year decline of 3.3%. Results were adversely impacted by 5% from unfavorable movements in foreign currencies and divested businesses.
Also, the top line lagged the Zacks Consensus Estimate of $939.1 million.
Aftermarket sales in the reported quarter increased 3.3% year over year (or grew 7.9% on a constant-currency basis) to $470 million. Furthermore, original equipment sales totaled $420 million, reflecting a year-over-year decline of 9.7% (or 6.9% on a constant-currency basis).
Bookings totaled $1.07 billion, reflecting growth of 14.9% or 19.3% on a constant-currency basis over the year-ago quarter. Of the end markets, booking strengthened in oil & gas end markets. Backlog at the end of the reported quarter was $2.1 billion.
The company reports net sales under two segments. A brief discussion on those is provided below:
Revenues from the Flowserve Pump Division were $609.4 million, decreasing 5.4% year over year or down 1.8% on a constant-currency basis. Bookings increased 24.2% year over year (or 29% on constant currency) to $750.2 million.
Revenues from the Flow Control Division were $282.1 million, increasing 1.8% year over year or 5.3% on a constant-currency basis. Bookings of $319.8 million declined 2.3% year over year or increased 1% on constant currency.
Margins Improve
In the quarter under review, Flowserve’s adjusted cost of sales decreased 7.9% year over year to $590.5 million. It represented 66.3% of sales compared with 69.7% in the year-ago quarter. Adjusted gross profit increased 7.5% to $299.6 million while gross margin increased 340 basis points (bps) year over year to 33.7%. Selling, general and administrative expenses decreased 2.4% year over year to $214.2 million. It represented 24.1% of sales.
Adjusted operating income in the quarter under review increased 40.6% year over year to $87.7 million. Moreover, adjusted operating margin grew 310 bps to 9.9%. Net interest and other expenses in the quarter were flat year over year at $12.4 million.
Effective tax rate was 25.6% versus 27.5% in the year-ago quarter.
Balance Sheet and Cash Flow
Exiting the first quarter, Flowserve had cash and cash equivalents of $637.7 million, up 2.9% from $619.7 million at the end of the last reported quarter. Long-term debt balance decreased 1.6% sequentially to $1,392.2 million.
In the first quarter, the company generated net cash of $38.5 million from operating activities versus net cash used of $120.7 million in the year-ago quarter. Capital expenditure totaled $10.6 million, decreasing 21.1% from $13.5 million spent in the previous year.
During the quarter, the company used $24.9 million for distributing dividends.
Outlook
Flowserve is progressing well with transformation initiatives. The multi-year Flowserve 2.0 strategy will help in simplifying the operating model and spur growth.
The company maintained its projections for 2019. Adjusted earnings per share are predicted to be $1.95-$2.15, suggesting an increase from $1.75 recorded in 2018. Revenues are anticipated to increase 4-6%. Adjusted tax rate for the year is predicted to be 26-28%. Net interest expenses are predicted to be $55-$57 million and capital expenditure is expected to be $90-$100 million.
Flowserve Corporation Price, Consensus and EPS Surprise
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Flowserve Corporation (FLS - Free Report) reported better-than-expected results for the first quarter of 2019, with a positive earnings surprise of 20.6%. However, sales lagged estimates by 5.2%.
This machinery company’s adjusted earnings in the reported quarter were 41 cents per share, surpassing the Zacks Consensus Estimate of 34 cents. Further, the bottom line increased 51.9% from the year-ago figure of 27 cents on the back of benefits from transformation initiatives.
Weak Pump Division Lowers Revenues
In the quarter under review, Flowserve’s sales were $890.1 million, reflecting a year-over-year decline of 3.3%. Results were adversely impacted by 5% from unfavorable movements in foreign currencies and divested businesses.
Also, the top line lagged the Zacks Consensus Estimate of $939.1 million.
Aftermarket sales in the reported quarter increased 3.3% year over year (or grew 7.9% on a constant-currency basis) to $470 million. Furthermore, original equipment sales totaled $420 million, reflecting a year-over-year decline of 9.7% (or 6.9% on a constant-currency basis).
Bookings totaled $1.07 billion, reflecting growth of 14.9% or 19.3% on a constant-currency basis over the year-ago quarter. Of the end markets, booking strengthened in oil & gas end markets. Backlog at the end of the reported quarter was $2.1 billion.
The company reports net sales under two segments. A brief discussion on those is provided below:
Revenues from the Flowserve Pump Division were $609.4 million, decreasing 5.4% year over year or down 1.8% on a constant-currency basis. Bookings increased 24.2% year over year (or 29% on constant currency) to $750.2 million.
Revenues from the Flow Control Division were $282.1 million, increasing 1.8% year over year or 5.3% on a constant-currency basis. Bookings of $319.8 million declined 2.3% year over year or increased 1% on constant currency.
Margins Improve
In the quarter under review, Flowserve’s adjusted cost of sales decreased 7.9% year over year to $590.5 million. It represented 66.3% of sales compared with 69.7% in the year-ago quarter. Adjusted gross profit increased 7.5% to $299.6 million while gross margin increased 340 basis points (bps) year over year to 33.7%. Selling, general and administrative expenses decreased 2.4% year over year to $214.2 million. It represented 24.1% of sales.
Adjusted operating income in the quarter under review increased 40.6% year over year to $87.7 million. Moreover, adjusted operating margin grew 310 bps to 9.9%. Net interest and other expenses in the quarter were flat year over year at $12.4 million.
Effective tax rate was 25.6% versus 27.5% in the year-ago quarter.
Balance Sheet and Cash Flow
Exiting the first quarter, Flowserve had cash and cash equivalents of $637.7 million, up 2.9% from $619.7 million at the end of the last reported quarter. Long-term debt balance decreased 1.6% sequentially to $1,392.2 million.
In the first quarter, the company generated net cash of $38.5 million from operating activities versus net cash used of $120.7 million in the year-ago quarter. Capital expenditure totaled $10.6 million, decreasing 21.1% from $13.5 million spent in the previous year.
During the quarter, the company used $24.9 million for distributing dividends.
Outlook
Flowserve is progressing well with transformation initiatives. The multi-year Flowserve 2.0 strategy will help in simplifying the operating model and spur growth.
The company maintained its projections for 2019. Adjusted earnings per share are predicted to be $1.95-$2.15, suggesting an increase from $1.75 recorded in 2018. Revenues are anticipated to increase 4-6%. Adjusted tax rate for the year is predicted to be 26-28%. Net interest expenses are predicted to be $55-$57 million and capital expenditure is expected to be $90-$100 million.
Flowserve Corporation Price, Consensus and EPS Surprise
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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