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Flowserve (FLS) Gains From Business Strength Amid Risks
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Flowserve Corporation (FLS - Free Report) has been benefiting from robust bookings driven by strong maintenance, repair, operations and aftermarket activity. Solid booking levels highlight strength across the company’s end markets. FLS’ Diversify, Decarbonize and Digitize strategy has also been supporting its growth. Notably, its fourth-quarter bookings of $1.04 billion marked the eighth consecutive quarter of more than $1 billion bookings.
Strength across its original equipment and aftermarket businesses are supporting both the Flowserve Pump Division (revenues increased 12.6% year over year in fourth-quarter 2023) and Flow Control Division (revenues grew 11.3% year over year in fourth-quarter 2023) segments. For 2024, the company projects revenues to grow in the range of 4-6% from the year-ago levels. It anticipates adjusted earnings per share to be between $2.40 and $2.60, indicating an increase of 19.1% from the prior-year actuals.
Management remains committed to rewarding its shareholders through dividend payouts. In 2023, the company paid dividends of $105 million. Also, a sound liquidity position adds to its strength. Exiting 2023, its cash and cash equivalents were $545.7 million, much higher than debt (due within one year) of $66.2 million. This implies that FLS has sufficient cash to meet its current debt obligations.
Image Source: Zacks Investment Research
In the past year, the Zacks Rank #3 (Hold) company has gained 32.6% compared with the industry’s 29.6% growth.
However, Flowserve has been grappling with escalating costs and expenses over time. In 2023, its cost of sales jumped 16.1% year over year due to higher input costs. Selling, general and administrative expenses also increased 17.9% in the same period due to higher broad-based annual incentive compensation.
Although Flowserve’s realignment plan is likely to provide long-term benefits, its realignment expenses might adversely impact profitability. For instance, its adjusted earnings guidance for 2024 incorporates realignment expenses of $30 million.
Applied Industrial delivered a trailing four-quarter average earnings surprise of 10.4%. In the past 60 days, the Zacks Consensus Estimate for AIT’s 2024 earnings has increased 1.7%.
Parker-Hannifin delivered a trailing four-quarter average earnings surprise of 14.4%. In the past 60 days, the Zacks Consensus Estimate for PH’s 2024 earnings has increased 4.2%.
Luxfer delivered a trailing four-quarter average earnings surprise of 82.7%. In the past 60 days, the Zacks Consensus Estimate for LXFR’s 2024 earnings has increased 111.4%.
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Flowserve (FLS) Gains From Business Strength Amid Risks
Flowserve Corporation (FLS - Free Report) has been benefiting from robust bookings driven by strong maintenance, repair, operations and aftermarket activity. Solid booking levels highlight strength across the company’s end markets. FLS’ Diversify, Decarbonize and Digitize strategy has also been supporting its growth. Notably, its fourth-quarter bookings of $1.04 billion marked the eighth consecutive quarter of more than $1 billion bookings.
Strength across its original equipment and aftermarket businesses are supporting both the Flowserve Pump Division (revenues increased 12.6% year over year in fourth-quarter 2023) and Flow Control Division (revenues grew 11.3% year over year in fourth-quarter 2023) segments. For 2024, the company projects revenues to grow in the range of 4-6% from the year-ago levels. It anticipates adjusted earnings per share to be between $2.40 and $2.60, indicating an increase of 19.1% from the prior-year actuals.
Management remains committed to rewarding its shareholders through dividend payouts. In 2023, the company paid dividends of $105 million. Also, a sound liquidity position adds to its strength. Exiting 2023, its cash and cash equivalents were $545.7 million, much higher than debt (due within one year) of $66.2 million. This implies that FLS has sufficient cash to meet its current debt obligations.
Image Source: Zacks Investment Research
In the past year, the Zacks Rank #3 (Hold) company has gained 32.6% compared with the industry’s 29.6% growth.
However, Flowserve has been grappling with escalating costs and expenses over time. In 2023, its cost of sales jumped 16.1% year over year due to higher input costs. Selling, general and administrative expenses also increased 17.9% in the same period due to higher broad-based annual incentive compensation.
Although Flowserve’s realignment plan is likely to provide long-term benefits, its realignment expenses might adversely impact profitability. For instance, its adjusted earnings guidance for 2024 incorporates realignment expenses of $30 million.
Stocks to Consider
We have highlighted three better-ranked stocks from the same space, namely Applied Industrial Technologies (AIT - Free Report) , Parker-Hannifin Corporation (PH - Free Report) and Luxfer Holdings plc (LXFR - Free Report) , each currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Applied Industrial delivered a trailing four-quarter average earnings surprise of 10.4%. In the past 60 days, the Zacks Consensus Estimate for AIT’s 2024 earnings has increased 1.7%.
Parker-Hannifin delivered a trailing four-quarter average earnings surprise of 14.4%. In the past 60 days, the Zacks Consensus Estimate for PH’s 2024 earnings has increased 4.2%.
Luxfer delivered a trailing four-quarter average earnings surprise of 82.7%. In the past 60 days, the Zacks Consensus Estimate for LXFR’s 2024 earnings has increased 111.4%.