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Flowserve (FLS) Q3 Earnings & Revenues Miss Estimates, Down Y/Y

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Flowserve Corporation (FLS - Free Report) reported weaker-than-expected third-quarter 2021 results, wherein earnings and sales missed estimates by 27.5% and 3.4%, respectively.

The machinery company’s adjusted earnings were 29 cents per share, lagging the Zacks Consensus Estimate of 40 cents. The bottom line decreased 42% from the year-ago figure of 50 cents due to lower sales.

Revenue Details

In the quarter under review, Flowserve’s sales were $866.1 million, reflecting a year-over-year decline of 6.3%. The metric was down 7.3% on a constant currency basis.

The company’s top line missed the Zacks Consensus Estimate of $896.6 million.

Aftermarket sales in the reported quarter were down 0.9% year over year (or down 1.8% on a constant-currency basis) to $440.9 million. Original equipment sales totaled $425.2 million, reflecting a decrease of 11.3% (or 12.5% on a constant-currency basis).

Bookings totaled $911.6 million in the quarter, reflecting an increase of 13.1% (or 11.8% on a constant-currency basis) from the year-ago quarter. Backlog at the end of the reported quarter was $1.97 billion.

The company currently has two reportable segments — Flowserve Pump Division and Flow Control Division. A brief discussion of the segments is provided below:

Revenues from the Flowserve Pump Division were $601.8 million, decreasing 10.2% year over year or 11.2% on a constant-currency basis. Bookings rose 15.1% to $660.9 million.

Revenues from the Flow Control Division were $266.1 million, increasing 4.3% year over year or 3.2% on a constant-currency basis. Bookings of $253.6 million increased 6.7%.

Flowserve Corporation Price, Consensus and EPS Surprise

Flowserve Corporation Price, Consensus and EPS Surprise

Flowserve Corporation price-consensus-eps-surprise-chart | Flowserve Corporation Quote

Margin Profile

In the third quarter, Flowserve’s cost of sales decreased 4.1% year over year to $612.6 million. It represented 70.7% of sales compared with 69.1% in the year-ago quarter. Gross profit decreased 11.1% to $253.5 million and margin contracted 160 basis points (bps) to 29.3%. Selling, general and administrative expenses were $200.9 million, relatively stable year over year. It represented 23.2% of sales.

Operating income in the quarter under review decreased 34.2% year over year to $57.4 million. Adjusted operating margin decreased 390 bps to 7%. Net interest and other expenses (adjusted) jumped 6.3% to $13.5 million. Effective tax rate was 15.2% compared with 22.7% in the year-ago quarter.

Balance Sheet and Cash Flow

Exiting the third quarter of 2021, Flowserve had cash and cash equivalents of $1,457.3 million, up 131.2% from $630.4 million at the previous quarter-end. Long-term debt was $1,272.2 million, down 2.7% on a sequential basis.

In the first nine months of 2021, it generated net cash of $151.1 million from operating activities, up 32.2% from the previous-year period. Capital expenditure in the period totaled $34 million, decreasing 26.7% from $46.4 million spent a year ago.

During the first nine months of the year, the company used $78.6 million for distributing dividends and $17.5 million for repurchasing shares.

Outlook

For 2021, the company expects revenues to decline 3.5-4.5% year over year compared with a fall of 2-4% guided earlier. It predicts adjusted earnings per share in the range of $1.40-$1.45 compared with $1.45-$1.65 predicted earlier. Adjusted tax rate is expected to be 20% compared with 21-23% guided earlier.

For the year, its interest expense (net) is anticipated to be $55-$60 million while capital expenditures are likely to be $65 million.

Zacks Rank & Stocks to Consider

The company currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks from the Zacks Industrial Products sector are Nordson Corporation (NDSN - Free Report) , AZZ Inc. (AZZ - Free Report) , and Brady Corporation (BRC - Free Report) . While Nordson currently sports a Zacks Rank #1 (Strong Buy), AZZ and Brady carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Nordson delivered an earnings surprise of 17.77%, on average, in the trailing four quarters.

AZZ delivered an earnings surprise of 25.47%, on average, in the trailing four quarters.

Brady delivered an earnings surprise of 2.49%, on average, in the trailing four quarters.

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