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Flowserve Corporation’s (FLS - Free Report) fourth-quarter 2022 adjusted earnings (excluding 29 cents from non-recurring items) of 63 cents per share beat the Zacks Consensus Estimate of 61 cents. The bottom line increased 40% year over year.
Flowserve’s total sales of $1,039 million beat the Zacks Consensus Estimate of $1,013 million. However, the top line increased 13.1% year over year. Sales increased 18.6% on a constant-currency basis.
Aftermarket sales in the reported quarter increased 11.9% year over year (or up 16.9% on a constant-currency basis) to $539.1 million. Original equipment sales totaled $499.1 million, reflecting an increase of 14.3% (up 20.3% on a constant-currency basis).
Bookings totaled $1.11 billion in the quarter, reflecting an increase of 14.2% (or 19.4% on a constant-currency basis) from the year-ago quarter. The backlog at the end of the reported quarter was $2.7 billion, up 36.5% year over year.
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 $739.4 million, up 13.9% year over year. Bookings rose 12.8% to $786.2 million.
Revenues from the Flow Control Division were $301.8 million, up 10.6% year over year. Bookings of $324.9 million increased 16.5%.
Flowserve Corporation Price, Consensus and EPS Surprise
In the fourth quarter, Flowserve’s cost of sales increased 14% year over year to $743.7 million. It represented 71.6% of sales compared with 71% in the year-ago quarter. Gross profit increased 10.5% to $295.2 million, and the margin contracted 60 basis points (bps) to 28.4%. Selling, general and administrative expenses were $193.6 million, up 3.4% year over year. It represented 18.6% of sales.
Operating income in the quarter increased 23.7% year over year to $105.3 million. The adjusted operating margin deteriorated to 10.1% from 10.8% in the year-ago quarter. The effective tax rate was (93.1) % in the quarter.
Balance Sheet and Cash Flow
Exiting the fourth quarter, Flowserve had cash and cash equivalents of $435 million compared with $658.5 million at the end of December 2021. Long-term debt (due after one year) was $1.2 billion compared with $1.3 billion at the end of December 2021.
In 2022, the company used net cash of $40 million from operating activities versus $250.1 million generated in the year-ago period. Capital expenditure in the period totaled $76.3 million, up 39% from the year ago.
In 2022, the company used $104.5 million for distributing dividends. Flowserve did not buy back shares during the period.
Outlook
Flowserve expects a 9-11% year-over-year increase in revenues in 2023. The company anticipates reported earnings per share of $1.40-$1.65 and adjusted earnings per share of $1.50-$1.75 for the year. The adjusted tax rate is anticipated to be 18-20%. The company expects net interest expenses of $55-$60 million and capital expenditure of $75-$85 million for the year.
Zacks Rank & Stocks to Consider
FLS currently has a Zacks Rank #3 (Hold). Some better-ranked companies from the Industrial Products sector are discussed below:
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Flowserve (FLS) Q4 Earnings & Sales Beat, Increase Y/Y
Flowserve Corporation’s (FLS - Free Report) fourth-quarter 2022 adjusted earnings (excluding 29 cents from non-recurring items) of 63 cents per share beat the Zacks Consensus Estimate of 61 cents. The bottom line increased 40% year over year.
Flowserve’s total sales of $1,039 million beat the Zacks Consensus Estimate of $1,013 million. However, the top line increased 13.1% year over year. Sales increased 18.6% on a constant-currency basis.
Aftermarket sales in the reported quarter increased 11.9% year over year (or up 16.9% on a constant-currency basis) to $539.1 million. Original equipment sales totaled $499.1 million, reflecting an increase of 14.3% (up 20.3% on a constant-currency basis).
Bookings totaled $1.11 billion in the quarter, reflecting an increase of 14.2% (or 19.4% on a constant-currency basis) from the year-ago quarter. The backlog at the end of the reported quarter was $2.7 billion, up 36.5% year over year.
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 $739.4 million, up 13.9% year over year. Bookings rose 12.8% to $786.2 million.
Revenues from the Flow Control Division were $301.8 million, up 10.6% year over year. Bookings of $324.9 million increased 16.5%.
Flowserve Corporation Price, Consensus and EPS Surprise
Flowserve Corporation price-consensus-eps-surprise-chart | Flowserve Corporation Quote
Margin Profile
In the fourth quarter, Flowserve’s cost of sales increased 14% year over year to $743.7 million. It represented 71.6% of sales compared with 71% in the year-ago quarter. Gross profit increased 10.5% to $295.2 million, and the margin contracted 60 basis points (bps) to 28.4%. Selling, general and administrative expenses were $193.6 million, up 3.4% year over year. It represented 18.6% of sales.
Operating income in the quarter increased 23.7% year over year to $105.3 million. The adjusted operating margin deteriorated to 10.1% from 10.8% in the year-ago quarter. The effective tax rate was (93.1) % in the quarter.
Balance Sheet and Cash Flow
Exiting the fourth quarter, Flowserve had cash and cash equivalents of $435 million compared with $658.5 million at the end of December 2021. Long-term debt (due after one year) was $1.2 billion compared with $1.3 billion at the end of December 2021.
In 2022, the company used net cash of $40 million from operating activities versus $250.1 million generated in the year-ago period. Capital expenditure in the period totaled $76.3 million, up 39% from the year ago.
In 2022, the company used $104.5 million for distributing dividends. Flowserve did not buy back shares during the period.
Outlook
Flowserve expects a 9-11% year-over-year increase in revenues in 2023. The company anticipates reported earnings per share of $1.40-$1.65 and adjusted earnings per share of $1.50-$1.75 for the year. The adjusted tax rate is anticipated to be 18-20%. The company expects net interest expenses of $55-$60 million and capital expenditure of $75-$85 million for the year.
Zacks Rank & Stocks to Consider
FLS currently has a Zacks Rank #3 (Hold). Some better-ranked companies from the Industrial Products sector are discussed below:
Allegion plc (ALLE - Free Report) presently carries a Zacks Rank #2 (Buy). ALLE’s earnings surprise in the last four quarters was 8.8%, on average. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks.
In the past 60 days, Allegion’s earnings estimates have been unchanged for 2022. The stock has gained 11.1% in the past six months.
A. O. Smith Corporation (AOS - Free Report) presently has a Zacks Rank of 2 and a trailing four-quarter earnings surprise of 3.2%, on average.
AOS’ earnings estimates have increased 4.1% for 2023 in the past 60 days. Shares of A. O. Smith have risen 7.4% in the past six months.
Valmont Industries, Inc. (VMI - Free Report) presently has a Zacks Rank of 2. VMI’s earnings surprise in the last four quarters was 12.5%, on average.
In the past 60 days, Valmont’s earnings estimates have been unchanged for 2022. The stock has rallied 11.3% in the past six months.