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Flowserve (FLS) Q1 Earnings & Revenues Miss Estimates, Down Y/Y

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Flowserve Corporation (FLS - Free Report) reported weaker-than-expected first-quarter 2022 results, wherein earnings and sales missed estimates by 66.7% and 4.5%, respectively.

In the reported quarter, the machinery company’s adjusted earnings were 7 cents per share, lagging the Zacks Consensus Estimate of 21 cents. The bottom line decreased 75% from the year-ago figure of 28 cents due to lower sales.

Revenue Details

In the first quarter, Flowserve’s sales were $821.1 million, reflecting a year-over-year decline of 4.2%. The metric was down 2% on a constant currency basis.

The company’s top line missed the Zacks Consensus Estimate of $859 million.

Aftermarket sales in the reported quarter were down 2.8% year over year (or down 0.4% on a constant-currency basis) to $437.9 million. Original equipment sales totaled $383.2 million, reflecting a decrease of 5.8% (or down 3.8% on a constant-currency basis).

Bookings totaled $1.09 billion in the quarter, reflecting an increase of 14.9% (or 17.6% on a constant-currency basis) from the year-ago quarter. Backlog at the end of the reported quarter was $2.23 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 $575.6 million, decreasing 4.5% year over year or 2.1% on a constant-currency basis. Bookings rose 21.7% to $795.6 million.

Revenues from the Flow Control Division were $247.9 million, decreasing 3.1% year over year or 1.2% on a constant-currency basis. Bookings of $294.3 million increased 0.1%.

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 first quarter, Flowserve’s cost of sales increased 0.8% year over year to $611.4 million. It represented 74.5% of sales compared with 70.7% in the year-ago quarter. Gross profit decreased 16.4% to $209.6 million, and margin contracted 120 basis points (bps) to 25.5%. Selling, general and administrative expenses were $206.1 million, up 3.9% year over year. It represented 25.1% of sales.

Adjusted operating income in the quarter decreased 61% year over year to $27.2 million. Adjusted operating margin fell 480 bps to 3.3%. Net interest and other expenses (adjusted) declined 32.2% to $12.2 million. Effective tax rate was 22.2% compared with 23.2% in the year-ago quarter.

Balance Sheet and Cash Flow

Exiting the first quarter, Flowserve had cash and cash equivalents of $575.8 million, down from $658.5 million at the previous quarter-end. Long-term debt was $1,251.6 million, down 0.8% on a sequential basis.

In the first three months of 2022, it used net cash of $26.8 million from operating activities versus $36.4 million generated in the year-ago period. Capital expenditure in the period totaled $14.1 million, increasing 23.7% from $11.4 million spent a year ago.

During the first three months of the year, the company used $26.1 million for distributing dividends and refrained from repurchasing shares.

Outlook

For 2022, the company expects revenues to grow 5-7% year over year compared with a rise of 7-9% guided earlier. It predicts adjusted earnings per share in the range of $1.50-$1.70, lower than $1.70-$1.90 estimated previously. 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 $60-$70 million.

Zacks Rank & Stocks to Consider

The company currently carries a Zacks Rank #3 (Hold).

Some better-ranked companies are discussed below.

AZZ Inc. (AZZ - Free Report) presently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here. Its earnings surprise for the last four quarters was 22.3%, on average.

AZZ’s earnings estimates increased 12.6% for fiscal 2022 (ending February 2022) in the past 60 days. Its shares have lost 4.9% in the past three months.

Graphic Packaging Holding Company (GPK - Free Report) presently sports a Zacks Rank #1. Its earnings surprise in the last four quarters was 7.2%, on average.

In the past 60 days, GPK’s earnings estimates have increased 8.1% for 2022. The stock has rallied 17.5% in the past three months.

Ferguson plc (FERG - Free Report) presently carries a Zacks Rank of 2 (Buy). FERG delivered a trailing four-quarter earnings surprise of 14.2%, on average.

Earnings estimates of Ferguson have increased 6.5% for fiscal 2022 (ending July 2022) in the past 60 days. FERG’s shares have declined 18.1% in the past three months.

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