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What's in the Offing for Flowserve (FLS) in Q2 Earnings?
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Flowserve Corporation (FLS - Free Report) is likely to report second-quarter 2018 results on Jul 26.
In the last reported quarter, the company posted earnings of 27 cents, which came in line with the Zacks Consensus Estimate. Overall, Flowserve delivered an average negative surprise of 11.26% in the trailing four quarters with one beat, two misses and in-line results in one.
Let’s see how things are shaping up for this announcement.
Factors to Consider
Flowserve remains vulnerable to cyclicality primarily from the oil & gas, general industrial and chemical industries. The company is facing dearth of middle and larger sized projects opportunities along with cost reduction and project delivery postponement pressures by customers. Hence, this remains a matter of concern for the company.
Over the past few quarters, the company's operations have suffered from project delays, rolling maintenance deferrals and extended timelines for both order placement and delivery acceptance. In addition, loss of sales leverage and related under-absorption have been hurting its profitability.
Moreover, the company, which generates more than half of its net sales from overseas operations, remains vulnerable to uncertainty in the broader macro environment. Of late, it has been facing operational uncertainties in several regions like North America, Latin America and Middle East, which affected bookings. Factors including currency rates, expected bookings and market volatility might put pressure on both the top- and bottom-line performance going forward. Particularly, Flowserve expects the currency headwinds to persist in the upcoming quarters, weighing on its profitability.
Further, over the past few quarters, pricing pressure has proved to be a major drag on the company's top-line performance. Although Flowserve's realignment plan will benefit it in long run, in the near term it will fuel expenses. For instance, for full-year 2017, cash costs associated with the company's realignment program came in at about $79 million. We believe high restructuring costs will weigh on earnings in the short term.
However, the Zacks Consensus Estimate for second-quarter revenues from the company’s Engineered Product Division segment is pegged at $445 million, reflecting growth of 4% year over year. Revenues from Industrial Product Division segment are also expected to chart decent growth, with estimates standing at $200 million compared with the reported figure of $192 million in the prior-year quarter. Also, revenues from the company’s Flow Control Division segment is expected to be $287 million compared with the reported figure of $275 million in the year-ago quarter.
Earnings Whispers
Our proven model does not conclusively show an earnings beat for Flowserve in the to-be-reported quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But that is not the case here as you will see below.
Zacks ESP: Flowserve has an Earnings ESP of -0.15%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: The company carries a Zacks Rank #4 (Sell).
As it is, we caution against Sell-rated stocks (Zacks Rank #4 or 5) going into an earnings announcement, especially when the company is seeing negative estimate revisions.
Key Picks
Here are some companies that you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:
Eaton Corporation, PLC (ETN - Free Report) has an Earnings ESP of +0.67% and a Zacks Rank of 2.
Emerson Electric Co. (EMR - Free Report) has an Earnings ESP of +0.15% and a Zacks Rank #2.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Image: Bigstock
What's in the Offing for Flowserve (FLS) in Q2 Earnings?
Flowserve Corporation (FLS - Free Report) is likely to report second-quarter 2018 results on Jul 26.
In the last reported quarter, the company posted earnings of 27 cents, which came in line with the Zacks Consensus Estimate. Overall, Flowserve delivered an average negative surprise of 11.26% in the trailing four quarters with one beat, two misses and in-line results in one.
Let’s see how things are shaping up for this announcement.
Factors to Consider
Flowserve remains vulnerable to cyclicality primarily from the oil & gas, general industrial and chemical industries. The company is facing dearth of middle and larger sized projects opportunities along with cost reduction and project delivery postponement pressures by customers. Hence, this remains a matter of concern for the company.
Over the past few quarters, the company's operations have suffered from project delays, rolling maintenance deferrals and extended timelines for both order placement and delivery acceptance. In addition, loss of sales leverage and related under-absorption have been hurting its profitability.
Moreover, the company, which generates more than half of its net sales from overseas operations, remains vulnerable to uncertainty in the broader macro environment. Of late, it has been facing operational uncertainties in several regions like North America, Latin America and Middle East, which affected bookings. Factors including currency rates, expected bookings and market volatility might put pressure on both the top- and bottom-line performance going forward. Particularly, Flowserve expects the currency headwinds to persist in the upcoming quarters, weighing on its profitability.
Further, over the past few quarters, pricing pressure has proved to be a major drag on the company's top-line performance. Although Flowserve's realignment plan will benefit it in long run, in the near term it will fuel expenses. For instance, for full-year 2017, cash costs associated with the company's realignment program came in at about $79 million. We believe high restructuring costs will weigh on earnings in the short term.
However, the Zacks Consensus Estimate for second-quarter revenues from the company’s Engineered Product Division segment is pegged at $445 million, reflecting growth of 4% year over year. Revenues from Industrial Product Division segment are also expected to chart decent growth, with estimates standing at $200 million compared with the reported figure of $192 million in the prior-year quarter. Also, revenues from the company’s Flow Control Division segment is expected to be $287 million compared with the reported figure of $275 million in the year-ago quarter.
Earnings Whispers
Our proven model does not conclusively show an earnings beat for Flowserve in the to-be-reported quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But that is not the case here as you will see below.
Zacks ESP: Flowserve has an Earnings ESP of -0.15%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Flowserve Corporation Price and EPS Surprise
Flowserve Corporation Price and EPS Surprise | Flowserve Corporation Quote
Zacks Rank: The company carries a Zacks Rank #4 (Sell).
As it is, we caution against Sell-rated stocks (Zacks Rank #4 or 5) going into an earnings announcement, especially when the company is seeing negative estimate revisions.
Key Picks
Here are some companies that you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:
Graco Inc. (GGG - Free Report) has an Earnings ESP of +4.00% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Eaton Corporation, PLC (ETN - Free Report) has an Earnings ESP of +0.67% and a Zacks Rank of 2.
Emerson Electric Co. (EMR - Free Report) has an Earnings ESP of +0.15% and a Zacks Rank #2.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Click here for the 6 trades >>