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Flowserve (FLS) Exhibits Strong Prospects, Risks Persist

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Flowserve Corporation (FLS - Free Report) stands to gain from higher bookings, solid backlog level, strong backlog conversion capability and its multi-year Flowserve 2.0 strategy in the quarters ahead. The company’s backlog at the end of first quarter of 2021 remained strong at $1.9 billion. Also, the Flowserve 2.0 strategy has been aiding it in simplifying the operating model and driving growth.

Also, the company’s strong liquidity position adds to its strength. Exiting the first quarter, it had total liquidity of more than $1.4 billion, consisting of cash and cash equivalents worth about $659.3 million and $742 million of available capacity under the revolving credit facility. Flowserve generated $253 million of free cash flow in 2020. In addition, its cost control measures are likely to continue helping it to maintain a healthy margin performance going forward.

Moreover, it focuses on rewarding shareholders through dividend payments and share repurchases. Notably, in the first quarter, the company used $26.5 million for paying out dividends and repurchasing shares worth $5.1 million.

Despite witnessing improved bookings in several of its end markets, the company remains wary about the coronavirus outbreak-related woes, which might continue to adversely impact its performance. Notably, it anticipates revenues to decline 3-5% on a year-over-year basis in 2021.

Further, the company’s high-debt profile poses a concern. Exiting the first quarter, its long-term debt remained high at $1,307.6 million. Also, interest expenses in the quarter jumped 29.2% year over year to $16.8 million.

In the past three months, this Zacks Rank #3 (Hold) stock has returned 9.5% compared with the industry’s growth of 10.3%.

Zacks Investment ResearchImage Source: Zacks Investment Research

Stocks to Consider

Some better-ranked stocks from the same space are Barnes Group, Inc. (B - Free Report) , Dover Corporation (DOV - Free Report) and Graco Inc. (GGG - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Barnes delivered an earnings surprise of 19.45% in the last reported quarter.

Dover delivered an earnings surprise of 21.35% in the last reported quarter.

Graco delivered an earnings surprise of 28.28% in the last reported quarter.

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