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Flowserve (FLS) Beats on Q2 Earnings, Revenues Slip Y/Y
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Flowserve Corporation’s (FLS - Free Report) second-quarter 2022 adjusted earnings (excluding 4 cents from non-recurring items) of 30 cents per share surpassed the Zacks Consensus Estimate of 26 cents. The bottom line declined approximately 19% year over year. Supply-chain woes and inflationary pressure hurt performance.
Flowserve’s total sales of $882.2 million missed the Zacks Consensus Estimate of $890.5 million. The top line dipped 1.8% year over year. However, sales increased 2.8% on a constant currency basis.
Aftermarket sales in the reported quarter were up 1.6% year over year (or up 5.7% on a constant-currency basis) to $470.9 million. Original equipment sales totaled $411.3 million, reflecting a decrease of 5.3% (or down 0.2% on a constant-currency basis).
Bookings totaled $1.04 billion in the quarter, reflecting an increase of 9.6% (or 14.5% on a constant-currency basis) from the year-ago quarter. Backlog at the end of the reported quarter was $2.32 billion, up 18.8% year over year.
Flowserve Corporation Price, Consensus and EPS Surprise
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 $614.9 million, down slightly year over year. Bookings rose 7.3% to $717.8 million.
Revenues from the Flow Control Division were $268.4 million, down 4.6% year over year. Bookings of $329.9 million increased 14.1%.
Margin Profile
In the second quarter, Flowserve’s cost of sales increased 2% year over year to $632.39 million. It represented 71.7% of sales compared with 69% in the year-ago quarter. Gross profit decreased 10.2% to $249.83 million, and margin contracted 270 basis points (bps) to 28.3%. Selling, general and administrative expenses were $194.61 million, down 7.7% year over year. It represented 22.1% of sales.
Operating income in the quarter decreased 19.7% year over year to $60.3 million. Adjusted operating margin deteriorated to 6.8% from 8% in the year-ago quarter. Effective tax rate was 20.1% compared with 5.4% in the year-ago quarter.
Balance Sheet and Cash Flow
Exiting the second quarter, Flowserve had cash and cash equivalents of $458.34 million compared with $658.45 million at the end of December 2021. Long-term debt (due after one year) was $1.24 billion, compared with $1.26 billion at the end of December 2021.
In the first half months of 2022, it used net cash of $71.37 million from operating activities versus $61.31 million generated in the year-ago period. Capital expenditure in the period totaled $31 million, up 37.6% from a year ago.
During the first six months of the year, the company used $52.27 million for distributing dividends. The company did not buyback shares during the period.
Outlook
Flowserve continues to expect 5-7% year-over-year increase in revenues in 2022. It still anticipates adjusted earnings per share in the range of $1.50-$1.70. The mid-point of the guided range — $1.6 — lies above the Zacks Consensus Estimate of $1.50. For the year, the adjusted tax rate is expected to be 20-22%.
For 2022, FLS anticipates interest expense (net) to be $45-$50 million, while capital expenditures are expected to be $60-$70 million. At the end of the fourth quarter of 2022, the company expects adjusted operating margin of 12-14%.
Zacks Rank & Key Picks
Flowserve carries a Zacks Rank #3 (Hold).
Some better-ranked stocks worth considering are as follows:
Griffon Corporation (GFF - Free Report) sports a Zacks Rank #1 (Strong Buy). The company has an impressive earnings surprise history having outperformed the Zacks Consensus Estimate in three of the preceding four quarters, while missing in one. The average beat was 97%. You can see the complete list of today’s Zacks #1 Rank stocks.
Griffon has an estimated earnings growth rate of 117.6% for the current year. The stock gained 16.3% in a year’s time.
Greif (GEF - Free Report) sports a Zacks Rank #1. The company’s earnings have surpassed the Zacks Consensus Estimate in each of the preceding four quarters, the average beat being 22.9%.
Greif has an estimated earnings growth rate of 36.8% for the current year. Shares of the company have rallied 15.2% in a year.
Titan International flaunts a Zacks Rank #1. The company’s earnings have outperformed the Zacks Consensus Estimate in each of the trailing four quarters, the average beat being 56.4%.
Titan International has an estimated earnings growth rate of 164.7%. Shares of the company have surged 94.8% in a year.
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Flowserve (FLS) Beats on Q2 Earnings, Revenues Slip Y/Y
Flowserve Corporation’s (FLS - Free Report) second-quarter 2022 adjusted earnings (excluding 4 cents from non-recurring items) of 30 cents per share surpassed the Zacks Consensus Estimate of 26 cents. The bottom line declined approximately 19% year over year. Supply-chain woes and inflationary pressure hurt performance.
Flowserve’s total sales of $882.2 million missed the Zacks Consensus Estimate of $890.5 million. The top line dipped 1.8% year over year. However, sales increased 2.8% on a constant currency basis.
Aftermarket sales in the reported quarter were up 1.6% year over year (or up 5.7% on a constant-currency basis) to $470.9 million. Original equipment sales totaled $411.3 million, reflecting a decrease of 5.3% (or down 0.2% on a constant-currency basis).
Bookings totaled $1.04 billion in the quarter, reflecting an increase of 9.6% (or 14.5% on a constant-currency basis) from the year-ago quarter. Backlog at the end of the reported quarter was $2.32 billion, up 18.8% year over year.
Flowserve Corporation Price, Consensus and EPS Surprise
Flowserve Corporation price-consensus-eps-surprise-chart | Flowserve Corporation Quote
Segmental Details
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 $614.9 million, down slightly year over year. Bookings rose 7.3% to $717.8 million.
Revenues from the Flow Control Division were $268.4 million, down 4.6% year over year. Bookings of $329.9 million increased 14.1%.
Margin Profile
In the second quarter, Flowserve’s cost of sales increased 2% year over year to $632.39 million. It represented 71.7% of sales compared with 69% in the year-ago quarter. Gross profit decreased 10.2% to $249.83 million, and margin contracted 270 basis points (bps) to 28.3%. Selling, general and administrative expenses were $194.61 million, down 7.7% year over year. It represented 22.1% of sales.
Operating income in the quarter decreased 19.7% year over year to $60.3 million. Adjusted operating margin deteriorated to 6.8% from 8% in the year-ago quarter. Effective tax rate was 20.1% compared with 5.4% in the year-ago quarter.
Balance Sheet and Cash Flow
Exiting the second quarter, Flowserve had cash and cash equivalents of $458.34 million compared with $658.45 million at the end of December 2021. Long-term debt (due after one year) was $1.24 billion, compared with $1.26 billion at the end of December 2021.
In the first half months of 2022, it used net cash of $71.37 million from operating activities versus $61.31 million generated in the year-ago period. Capital expenditure in the period totaled $31 million, up 37.6% from a year ago.
During the first six months of the year, the company used $52.27 million for distributing dividends. The company did not buyback shares during the period.
Outlook
Flowserve continues to expect 5-7% year-over-year increase in revenues in 2022. It still anticipates adjusted earnings per share in the range of $1.50-$1.70. The mid-point of the guided range — $1.6 — lies above the Zacks Consensus Estimate of $1.50. For the year, the adjusted tax rate is expected to be 20-22%.
For 2022, FLS anticipates interest expense (net) to be $45-$50 million, while capital expenditures are expected to be $60-$70 million. At the end of the fourth quarter of 2022, the company expects adjusted operating margin of 12-14%.
Zacks Rank & Key Picks
Flowserve carries a Zacks Rank #3 (Hold).
Some better-ranked stocks worth considering are as follows:
Griffon Corporation (GFF - Free Report) sports a Zacks Rank #1 (Strong Buy). The company has an impressive earnings surprise history having outperformed the Zacks Consensus Estimate in three of the preceding four quarters, while missing in one. The average beat was 97%. You can see the complete list of today’s Zacks #1 Rank stocks.
Griffon has an estimated earnings growth rate of 117.6% for the current year. The stock gained 16.3% in a year’s time.
Greif (GEF - Free Report) sports a Zacks Rank #1. The company’s earnings have surpassed the Zacks Consensus Estimate in each of the preceding four quarters, the average beat being 22.9%.
Greif has an estimated earnings growth rate of 36.8% for the current year. Shares of the company have rallied 15.2% in a year.
Titan International flaunts a Zacks Rank #1. The company’s earnings have outperformed the Zacks Consensus Estimate in each of the trailing four quarters, the average beat being 56.4%.
Titan International has an estimated earnings growth rate of 164.7%. Shares of the company have surged 94.8% in a year.