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Flowserve (FLS) Down 7.8% Since Last Earnings Report: Can It Rebound?
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It has been about a month since the last earnings report for Flowserve (FLS - Free Report) . Shares have lost about 7.8% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Flowserve due for a breakout? 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 drivers.
Flowserve’s 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%.
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 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.
During 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. The company expects net interest expense of $55-$60 million and capital expenditure of $75-$85 million for the year.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates flatlined during the past month.
VGM Scores
Currently, Flowserve has a nice Growth Score of B, a grade with the same score on the momentum front. Following the exact same course, 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
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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Flowserve (FLS) Down 7.8% Since Last Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for Flowserve (FLS - Free Report) . Shares have lost about 7.8% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Flowserve due for a breakout? 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 drivers.
Flowserve Q4 Earnings & Revenues Beat, Increase Y/Y
Flowserve’s 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%.
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 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.
During 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. The company expects net interest expense of $55-$60 million and capital expenditure of $75-$85 million for the year.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates flatlined during the past month.
VGM Scores
Currently, Flowserve has a nice Growth Score of B, a grade with the same score on the momentum front. Following the exact same course, 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
Flowserve has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.