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Flowserve (FLS) Down 12.1% Since Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Flowserve Corporation (FLS - Free Report) . Shares have lost about 12.1% in that time frame.

Will the recent negative trend continue leading up to its next earnings release, or is FLS due for a breakout? 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 catalysts.

Flowserve Q1 Earnings In Line, Sales Beat Estimates

Flowserve reported first-quarter 2018 adjusted earnings of 27 cents per share, which came in line with the Zacks Consensus Estimate. On a year-over-year basis, the bottom-line figure improved 8% backed by robust sales growth.

The company’s earnings per share came in at 12 cents on a reported basis, which included pre-tax adjusted items of $25 million.

Quarter in Detail

In the quarter under review, sales increased 6.2% year over year to $920 million. The reported figure surpassed the Zacks Consensus Estimate of $884 million. Solid growth in sales across the company’s two of the three segments drove the overall top line.

The company’s bookings totaled $929 million, down 3% year over year. The downside can be attributed to divested businesses. After-market bookings amounted to $482 million, up 5.4%.

Adjusted gross margin was 30.3% in the first quarter compared with 31.5% in the year-ago quarter. Operating income in the reported quarter increased to $62.4 million from $60.9 million in the first-quarter 2017. Adjusted operating margin was 6.8% compared with 7% for the prior-year period.
Segmental Details

Engineered Product Division sales increased 10.1% year over year to $467.7 million in the reported quarter. However, bookings declined 7.9% year over year to $424.3 million.

Sales at the Industrial Product Division were up 11% year over year to $198.1 million. Nonetheless, bookings decreased 4% to $198.5 million.

Flow Control Division’s sales declined 1.1% year over year to $277.2 million. At the segment, bookings improved 5.6% year over year to $327.3 million.

Balance Sheet & Cash Flow

Flowserve ended the first quarter with cash and cash equivalents of about $535.7 million compared with $325.8 million as of Mar 31, 2017. As of Mar 31, 2018, the company’s long-term debt totaled $1,501.4 million, marginally up from $1,499.6 million as of Dec 31, 2017.

Net cash flow used by operating activities was $120.7 million for the reported quarter compared with net cash flow of $3.9 million provided by operating activities in the prior-year period.

2018 View

Concurrent with the first-quarter 2018 results, Flowserve reiterated its 2018 outlook. The company continues to expect adjusted earnings per share in the band of $1.50-$1.70. Revenues are also projected to increase in the range of 3-6%.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month. There have been three revisions higher for the current quarter compared to three lower.

Flowserve Corporation Price and Consensus

 

Flowserve Corporation Price and Consensus | Flowserve Corporation Quote

VGM Scores

At this time, FLS has a poor Growth Score of F, however its Momentum is doing a bit better with a D. The stock was also allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Our style scores indicate investors will probably be better served looking elsewhere.

Outlook

FLS has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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