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Flowserve (FLS) to Post Q2 Earnings: Is a Beat in the Cards?

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Flowserve Corporation (FLS - Free Report) is scheduled to release second-quarter 2021 results on Aug 5, after market close.

The company surpassed estimates thrice in the last four quarters and missed it once, the earnings surprise being 33.19%, on average. Its first-quarter 2021 earnings of 28 cents per share surpassed the Zacks Consensus Estimate of 20 cents by 40.00%.

Zacks Investment Research
Image Source: Zacks Investment Research

In the past three months, the company’s shares have gained 0.3% against the industry’s decline of 3.3%.

Factors at Play

In the second quarter, Flowserve is anticipated to have benefited from its diversified business structure, which allows it to mitigate risks associated with one end market with strength across others. Given its solid product offerings, the company is likely to have gained from the strength in chemical and water management end markets.

The company is expected to have benefited from increased bookings, driven by higher maintenance, repair & operations and aftermarket activity. Also, its robust backlog level, which was $1.9 billion at the end of the previous quarter along with its strong backlog conversion capability might have supported its performance.

The company’s multi-year Flowserve 2.0 strategy is likely to have allowed it in capturing margin enhancement opportunities with efficient cost management in the quarter. In addition, its efforts to enhance sales process, along with its focus on supply-chain optimization, might get reflected in the upcoming results. Its efforts to improve operational productivity, coupled with a healthy liquidity position, might have helped it to maintain a solid margin.

However, the coronavirus-led market downturn is likely to have affected the demand for its products and services in some of its end markets. Further, its realignment plan has been fuelling expenses and adversely impacting profitability over the past few quarters — a trend which might have continued in the second quarter as well.

The Zacks Consensus Estimate for second-quarter revenues from the Flow Control Division segment is currently pegged at $263 million, indicating an increase of 2.7% from the previous quarter’s reported number. The consensus estimate for revenues from the Pump Division segment is pegged at $623 million, indicating growth of 3.3% from the previous quarter’s reported number.

The Zacks Consensus Estimate for the company’s second-quarter total revenues is currently pegged at $891 million, suggesting an increase of 4% sequentially. The consensus estimate for earnings of 43 cents suggests an improvement of 53.6% on a sequential basis.

Earnings Whispers

According to our quantitative model, a stock needs to have the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold) to increase the odds of an earnings beat.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

This is the case here as given below:

Earnings ESP: Flowserve has an Earnings ESP of +3.58%, as the Most Accurate Estimate is pegged at 44 cents, higher than the Zacks Consensus Estimate of 43 cents.

Flowserve Corporation Price and EPS Surprise

Flowserve Corporation Price and EPS Surprise

Flowserve Corporation price-eps-surprise | Flowserve Corporation Quote

Zacks Rank: The company carries a Zacks Rank #2.

Other Key Picks

Here are some other companies that you may want to consider as our model shows that these too have the right combination of elements to post an earnings beat this quarter:

Eaton Corporation plc (ETN - Free Report) has an Earnings ESP of +2.17% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Deere & Company (DE - Free Report) has an Earnings ESP of +11.97% and Zacks Rank #2.

Donaldson Company, Inc. (DCI - Free Report) has an Earnings ESP of +3.03% and a Zacks Rank of 3.