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Why Is Flowserve (FLS) Up 14.8% Since Last Earnings Report?
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It has been about a month since the last earnings report for Flowserve (FLS - Free Report) . Shares have added about 14.8% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Flowserve due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Flowserve Q4 Earnings & Revenues Miss Estimates, Down Y/Y
Flowserve reported weaker-than-expected fourth-quarter 2021 results, wherein earnings and sales missed estimates by 6.3% and 3.1%, respectively.
In the reported quarter, the machinery company’s adjusted earnings were 45 cents per share, lagging the Zacks Consensus Estimate of 48 cents. The bottom line decreased 15.1% from the year-ago figure of 53 cents due to lower sales.
In 2021, the company’s earnings came in at $1.38, a decrease of 20.7% on a year-over-year basis.
Revenue Details
In the fourth quarter, Flowserve’s sales were $919.5 million, reflecting a year-over-year decline of 6.7%. The metric was down 5.7% on a constant currency basis.
The company’s top line missed the Zacks Consensus Estimate of $949 million.
Aftermarket sales in the reported quarter were up 0.7% year over year (or up 1.8% on a constant-currency basis) to $481.8 million. Original equipment sales totaled $437.6 million, reflecting a decrease of 13.7% (or down 12.7% on a constant-currency basis).
Bookings totaled $969.1 million in the quarter, reflecting an increase of 17.5% (or 18.9% on a constant-currency basis) from the year-ago quarter. Backlog at the end of the reported quarter was $2 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 $648.9 million, decreasing 6.7% year over year or 5.6% on a constant-currency basis. Bookings rose 22.4% to $693.5 million.
Revenues from the Flow Control Division were $272.8 million, decreasing 6.2% year over year or 5.6% on a constant-currency basis. Bookings of $278.8 million increased 7.9%.
In 2021, the company’s revenues came in at $3,541.1 million, down 5% year over year.
Margin Profile
In the fourth quarter, Flowserve’s cost of sales decreased 5.7% year over year to $652.4 million. It represented 71% of sales compared with 70% in the year-ago quarter. Gross profit decreased 9.6% to $267.1 million, and margin contracted 20 basis points (bps) to 29%. Selling, general and administrative expenses were $187.1 million, down 7.7% year over year. It represented 20.3% of sales.
Adjusted operating income in the quarter decreased 23.6% year over year to $85.4 million. Adjusted operating margin decreased 200 bps to 9.3%. Net interest and other expenses (adjusted) jumped 7.6% to $62 million. Effective tax rate was 14.8% compared with 21% in the year-ago quarter.
Balance Sheet and Cash Flow
Exiting the fourth quarter of 2021, Flowserve had cash and cash equivalents of $658.5 million, down from $1,457.3 million at the previous quarter-end. Long-term debt was $1,261.8 million, down 0.8% on a sequential basis.
In 2021, it generated net cash of $250.1 million from operating activities, down 19.5% from the previous year. Capital expenditure in the period totaled $54.9 million, decreasing 4.3% from $57.4 million spent a year ago.
During the year, the company used $104.6 million for distributing dividends and $17.5 million for repurchasing shares.
Outlook
For 2022, the company expects revenues to grow 7-9% year over year. It predicts adjusted earnings per share in the range of $1.70-$1.90. For the year, the adjusted tax rate is expected to be 20-22%.
For the year, its interest expense (net) is anticipated to be $45-$50 million, while capital expenditures are likely to be $70-$80 million.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
The consensus estimate has shifted -41.98% due to these changes.
VGM Scores
At this time, Flowserve has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Flowserve has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is Flowserve (FLS) Up 14.8% Since Last Earnings Report?
It has been about a month since the last earnings report for Flowserve (FLS - Free Report) . Shares have added about 14.8% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Flowserve due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Flowserve Q4 Earnings & Revenues Miss Estimates, Down Y/Y
Flowserve reported weaker-than-expected fourth-quarter 2021 results, wherein earnings and sales missed estimates by 6.3% and 3.1%, respectively.
In the reported quarter, the machinery company’s adjusted earnings were 45 cents per share, lagging the Zacks Consensus Estimate of 48 cents. The bottom line decreased 15.1% from the year-ago figure of 53 cents due to lower sales.
In 2021, the company’s earnings came in at $1.38, a decrease of 20.7% on a year-over-year basis.
Revenue Details
In the fourth quarter, Flowserve’s sales were $919.5 million, reflecting a year-over-year decline of 6.7%. The metric was down 5.7% on a constant currency basis.
The company’s top line missed the Zacks Consensus Estimate of $949 million.
Aftermarket sales in the reported quarter were up 0.7% year over year (or up 1.8% on a constant-currency basis) to $481.8 million. Original equipment sales totaled $437.6 million, reflecting a decrease of 13.7% (or down 12.7% on a constant-currency basis).
Bookings totaled $969.1 million in the quarter, reflecting an increase of 17.5% (or 18.9% on a constant-currency basis) from the year-ago quarter. Backlog at the end of the reported quarter was $2 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 $648.9 million, decreasing 6.7% year over year or 5.6% on a constant-currency basis. Bookings rose 22.4% to $693.5 million.
Revenues from the Flow Control Division were $272.8 million, decreasing 6.2% year over year or 5.6% on a constant-currency basis. Bookings of $278.8 million increased 7.9%.
In 2021, the company’s revenues came in at $3,541.1 million, down 5% year over year.
Margin Profile
In the fourth quarter, Flowserve’s cost of sales decreased 5.7% year over year to $652.4 million. It represented 71% of sales compared with 70% in the year-ago quarter. Gross profit decreased 9.6% to $267.1 million, and margin contracted 20 basis points (bps) to 29%. Selling, general and administrative expenses were $187.1 million, down 7.7% year over year. It represented 20.3% of sales.
Adjusted operating income in the quarter decreased 23.6% year over year to $85.4 million. Adjusted operating margin decreased 200 bps to 9.3%. Net interest and other expenses (adjusted) jumped 7.6% to $62 million. Effective tax rate was 14.8% compared with 21% in the year-ago quarter.
Balance Sheet and Cash Flow
Exiting the fourth quarter of 2021, Flowserve had cash and cash equivalents of $658.5 million, down from $1,457.3 million at the previous quarter-end. Long-term debt was $1,261.8 million, down 0.8% on a sequential basis.
In 2021, it generated net cash of $250.1 million from operating activities, down 19.5% from the previous year. Capital expenditure in the period totaled $54.9 million, decreasing 4.3% from $57.4 million spent a year ago.
During the year, the company used $104.6 million for distributing dividends and $17.5 million for repurchasing shares.
Outlook
For 2022, the company expects revenues to grow 7-9% year over year. It predicts adjusted earnings per share in the range of $1.70-$1.90. For the year, the adjusted tax rate is expected to be 20-22%.
For the year, its interest expense (net) is anticipated to be $45-$50 million, while capital expenditures are likely to be $70-$80 million.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
The consensus estimate has shifted -41.98% due to these changes.
VGM Scores
At this time, Flowserve has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Flowserve has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.