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Flowserve Corporation (FLS - Free Report) has been benefiting from solid growth in bookings for its products, supported by higher maintenance, repair & operations, and aftermarket activity. In the second quarter of 2021, the company’s total bookings recorded an increase of 17.9% on a sequential basis. Exiting the second quarter, its backlog was strong at $1.95 billion, reflecting an increase of 2.6% sequentially. A healthy backlog level, coupled with its strong backlog conversion capability, is likely to drive its performance in the quarters ahead.
The company’s robust liquidity position adds to its strength. Exiting the second quarter, it had total available liquidity of nearly $1.4 billion, consisting of cash and cash equivalents balance of $630.4 million, and $739 million of available capacity under its revolving credit facility. Also, it remains committed to rewarding shareholders handsomely through dividend payments and share repurchases. In the first half of 2021, the company paid out dividends worth $52.2 million and repurchased shares worth $17.5 million.
Going forward, the implementation of additional Flowserve 2.0 initiatives would likely enable it to capture more margin enhancement opportunities with efficient cost management and higher productivity. For 2021, it expects to achieve run-rate cost savings of $125 million.
However, difficult original equipment end-market conditions owing to the pandemic might continue to affect Flowserve’s performance in the near term. The company expects revenues to decline 2-4% on a year-over-year basis for 2021.
The company’s high-debt profile also poses a concern. Exiting the second quarter, its long-term debt remained high at $1,307.1 million. Interest expenses in the quarter jumped 10.9% year over year to $14.3 million. Any further increase in debt levels can raise the company’s financial obligations.
Image Source: Zacks Investment Research
In the past year, this Zacks Rank #3 (Hold) stock has returned 33.7% compared with the industry’s growth of 31.8%.
Image: Bigstock
Flowserve (FLS) Exhibits Bright Prospects Amid Headwinds
Flowserve Corporation (FLS - Free Report) has been benefiting from solid growth in bookings for its products, supported by higher maintenance, repair & operations, and aftermarket activity. In the second quarter of 2021, the company’s total bookings recorded an increase of 17.9% on a sequential basis. Exiting the second quarter, its backlog was strong at $1.95 billion, reflecting an increase of 2.6% sequentially. A healthy backlog level, coupled with its strong backlog conversion capability, is likely to drive its performance in the quarters ahead.
The company’s robust liquidity position adds to its strength. Exiting the second quarter, it had total available liquidity of nearly $1.4 billion, consisting of cash and cash equivalents balance of $630.4 million, and $739 million of available capacity under its revolving credit facility. Also, it remains committed to rewarding shareholders handsomely through dividend payments and share repurchases. In the first half of 2021, the company paid out dividends worth $52.2 million and repurchased shares worth $17.5 million.
Going forward, the implementation of additional Flowserve 2.0 initiatives would likely enable it to capture more margin enhancement opportunities with efficient cost management and higher productivity. For 2021, it expects to achieve run-rate cost savings of $125 million.
However, difficult original equipment end-market conditions owing to the pandemic might continue to affect Flowserve’s performance in the near term. The company expects revenues to decline 2-4% on a year-over-year basis for 2021.
The company’s high-debt profile also poses a concern. Exiting the second quarter, its long-term debt remained high at $1,307.1 million. Interest expenses in the quarter jumped 10.9% year over year to $14.3 million. Any further increase in debt levels can raise the company’s financial obligations.
Image Source: Zacks Investment Research
In the past year, this Zacks Rank #3 (Hold) stock has returned 33.7% compared with the industry’s growth of 31.8%.
Key Picks
Some better-ranked stocks from the same space are Kadant Inc. (KAI - Free Report) , Dover Corporation (DOV - Free Report) , and EnPro Industries, Inc. (NPO - Free Report) . While Kadant sports a Zacks Rank #1 (Strong Buy), Dover and EnPro Industries carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Kadant pulled off a trailing four-quarter earnings surprise of 22.26%, on average.
Dover pulled off a trailing four-quarter earnings surprise of 17.59%, on average.
EnPro Industries pulled off a trailing four-quarter earnings surprise of 80.64%, on average.