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Why Is Flowserve (FLS) Up 3% 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 3% in that time frame, underperforming 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 the most recent earnings report in order to get a better handle on the important drivers.
Flowserve’s third-quarter 2023 adjusted earnings (excluding 15 cents from non-recurring items) of 50 cents per share beat the Zacks Consensus Estimate of earnings of 41 cents per share. The bottom line increased 455.6% year over year.
Flowserve’s total sales of $1,094.7 million beat the consensus estimate of $1,020 million. The top line increased 25.4% year over year. Sales increased 23% on a constant-currency basis.
Aftermarket sales in the reported quarter increased 22.7% year over year (or up 20.4% on a constant-currency basis) to $565.5 million. Original equipment sales totaled $529.2 million, reflecting an increase of 28.4% (up 25.9% on a constant-currency basis).
Bookings totaled $1.07 billion in the quarter, reflecting a decrease of 12.7% (or 14.3% on a constant-currency basis) from the year-ago quarter. The backlog at the end of the reported quarter was $2.77 billion, up 6.6% year over year.
Segmental Details
The company currently has two reportable segments, which are the Flowserve Pump Division and the Flow Control Division. A brief discussion of the segments is provided below:
Revenues from the Flowserve Pump Division segment were $766.2 million, up 29.3% year over year. Bookings decreased 20.6% to $734.7 million. The segment’s operating income was $78.3 million for the quarter, up 101.3% year over year. Our estimate for the same was $76.9 million.
Revenues from the Flow Control Division segment were $330.7 million, up 17.0% year over year. Our estimate for segmental revenues was $297.7 million. Bookings of $330.5 million increased 10.2%. The segment operating income was $43.5 million for the quarter, up 46.5% year over year. Our estimate for the same was $35.0 million.
Margin Profile
In the third quarter, Flowserve’s cost of sales increased 22.7% year over year to $777 million. Gross profit increased 32.6% to $317.7 million and the margin increased 160 basis points (bps) to 29.0%. Selling, general and administrative expenses were $252.1 million, up 14% year over year.
Operating income in the quarter increased 190.1% year over year to $70.3 million. The adjusted operating margin increased to 8.7%, up 630 bps year over year. The effective tax rate was (27.0%) in the quarter.
Balance Sheet and Cash Flow
Exiting the third quarter, Flowserve had cash and cash equivalents of $480.5 million compared with $435 million at the end of December 2022. Long-term debt (due after one year) was $1,266.4 million compared with $1,224.2 million at the end of December 2022.
In the first nine months of 2023, the company generated net cash of $131.1 million from operating activities against $109.5 million used in the year-ago period. Capital expenditure in the period totaled $47.5 million, up 3.7% from the year-ago period.
During the same time period, the company used $78.7 million for distributing dividends.
2023 Guidance Revised
Flowserve expects a 18.0-19.0% year-over-year increase in revenues in 2023 compared with 16.0-18.0% predicted before. The company anticipates reported earnings per share to be $1.40-$1.50. Adjusted earnings per share are estimated to be $1.95-$2.05 for the year compared with $1.85-$2.00 per expected earlier.
The midpoint of the guided range — $2.00 — lies above the Zacks Consensus Estimate of adjusted earnings of $1.98 per share. The adjusted tax rate is anticipated to be approximately 20%. The company expects net interest expense of approximately $60 million and capital expenditure of $75-$85 million for the year.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
VGM Scores
At this time, Flowserve has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. 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 #1 (Strong Buy). We expect an above average return from the stock in the next few months.
Performance of an Industry Player
Flowserve belongs to the Zacks Manufacturing - General Industrial industry. Another stock from the same industry, Illinois Tool Works (ITW - Free Report) , has gained 7.4% over the past month. More than a month has passed since the company reported results for the quarter ended September 2023.
Illinois Tool Works reported revenues of $4.03 billion in the last reported quarter, representing a year-over-year change of +0.5%. EPS of $2.55 for the same period compares with $2.35 a year ago.
For the current quarter, Illinois Tool Works is expected to post earnings of $2.38 per share, indicating a change of +1.7% from the year-ago quarter. The Zacks Consensus Estimate has changed -2.5% over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Illinois Tool Works. Also, the stock has a VGM Score of D.
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Why Is Flowserve (FLS) Up 3% Since Last Earnings Report?
It has been about a month since the last earnings report for Flowserve (FLS - Free Report) . Shares have added about 3% in that time frame, underperforming 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 the most recent earnings report in order to get a better handle on the important drivers.
Flowserve Q3 Earnings & Revenues Beat, Increase Y/Y
Flowserve’s third-quarter 2023 adjusted earnings (excluding 15 cents from non-recurring items) of 50 cents per share beat the Zacks Consensus Estimate of earnings of 41 cents per share. The bottom line increased 455.6% year over year.
Flowserve’s total sales of $1,094.7 million beat the consensus estimate of $1,020 million. The top line increased 25.4% year over year. Sales increased 23% on a constant-currency basis.
Aftermarket sales in the reported quarter increased 22.7% year over year (or up 20.4% on a constant-currency basis) to $565.5 million. Original equipment sales totaled $529.2 million, reflecting an increase of 28.4% (up 25.9% on a constant-currency basis).
Bookings totaled $1.07 billion in the quarter, reflecting a decrease of 12.7% (or 14.3% on a constant-currency basis) from the year-ago quarter. The backlog at the end of the reported quarter was $2.77 billion, up 6.6% year over year.
Segmental Details
The company currently has two reportable segments, which are the Flowserve Pump Division and the Flow Control Division. A brief discussion of the segments is provided below:
Revenues from the Flowserve Pump Division segment were $766.2 million, up 29.3% year over year. Bookings decreased 20.6% to $734.7 million. The segment’s operating income was $78.3 million for the quarter, up 101.3% year over year. Our estimate for the same was $76.9 million.
Revenues from the Flow Control Division segment were $330.7 million, up 17.0% year over year. Our estimate for segmental revenues was $297.7 million. Bookings of $330.5 million increased 10.2%. The segment operating income was $43.5 million for the quarter, up 46.5% year over year. Our estimate for the same was $35.0 million.
Margin Profile
In the third quarter, Flowserve’s cost of sales increased 22.7% year over year to $777 million. Gross profit increased 32.6% to $317.7 million and the margin increased 160 basis points (bps) to 29.0%. Selling, general and administrative expenses were $252.1 million, up 14% year over year.
Operating income in the quarter increased 190.1% year over year to $70.3 million. The adjusted operating margin increased to 8.7%, up 630 bps year over year. The effective tax rate was (27.0%) in the quarter.
Balance Sheet and Cash Flow
Exiting the third quarter, Flowserve had cash and cash equivalents of $480.5 million compared with $435 million at the end of December 2022. Long-term debt (due after one year) was $1,266.4 million compared with $1,224.2 million at the end of December 2022.
In the first nine months of 2023, the company generated net cash of $131.1 million from operating activities against $109.5 million used in the year-ago period. Capital expenditure in the period totaled $47.5 million, up 3.7% from the year-ago period.
During the same time period, the company used $78.7 million for distributing dividends.
2023 Guidance Revised
Flowserve expects a 18.0-19.0% year-over-year increase in revenues in 2023 compared with 16.0-18.0% predicted before. The company anticipates reported earnings per share to be $1.40-$1.50. Adjusted earnings per share are estimated to be $1.95-$2.05 for the year compared with $1.85-$2.00 per expected earlier.
The midpoint of the guided range — $2.00 — lies above the Zacks Consensus Estimate of adjusted earnings of $1.98 per share. The adjusted tax rate is anticipated to be approximately 20%. The company expects net interest expense of approximately $60 million and capital expenditure of $75-$85 million for the year.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
VGM Scores
At this time, Flowserve has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. 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 #1 (Strong Buy). We expect an above average return from the stock in the next few months.
Performance of an Industry Player
Flowserve belongs to the Zacks Manufacturing - General Industrial industry. Another stock from the same industry, Illinois Tool Works (ITW - Free Report) , has gained 7.4% over the past month. More than a month has passed since the company reported results for the quarter ended September 2023.
Illinois Tool Works reported revenues of $4.03 billion in the last reported quarter, representing a year-over-year change of +0.5%. EPS of $2.55 for the same period compares with $2.35 a year ago.
For the current quarter, Illinois Tool Works is expected to post earnings of $2.38 per share, indicating a change of +1.7% from the year-ago quarter. The Zacks Consensus Estimate has changed -2.5% over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Illinois Tool Works. Also, the stock has a VGM Score of D.