Machinery companies are poised to gain from expanding industrial production, rising demand for machinery made in the United States and expanding global economy. Additionally, growth in infrastructural developments, policy changes like the Tax Cut and Jobs Act implemented in December last year, and healthy job market will be favorable.
In such favorable operating environment, it is advisable for investors — who are seeking exposure in the machinery space — to choose stocks that currently sport a Zacks Rank #1 (Strong Buy) or #2 (Buy). Of the many investment options, we believe Flowserve Corporation (FLS - Free Report) to be a smart choice. The stock currently carries a Zacks Rank #2 and has a favorable VGM Score of B.
Flowserve belongs to the machinery sub-industry, which has companies that primarily work for general industries. This industry is positioned in the top 36% of more than 250 Zacks industries. Per our research, the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
Below we discussed why Flowserve is currently a worthy investment option.
Share Price and Earnings Performances, Robust Bottom-Line Outlook: Market sentiments seem to be favoring Flowserve lately. Year to date, the company’s share price has yielded 9.2% return against 9.6% decline recorded by the industry.
In the last reported quarter, Flowserve’s earnings were 49 cents per share, surpassing the Zacks Consensus Estimate by 16.67%. Further, the bottom line surged 32.4% year over year, mainly on the back of solid sales growth.
In the quarters ahead, Flowserve anticipates gaining from healthy demand in end-markets served, its realignment initiatives and lower tax rates. For 2018, the company now anticipates adjusted earnings per share of $1.65-$1.75, up from previously mentioned $1.50-$1.70. Moreover, the revised projection (at mid-point) reflects year-over-year growth of 25%. Tax rates are predicted to be 27-28%, lower than 30% recorded in 2017.
Earnings estimates provided by the brokerage firms have been revised upward, reflecting positive sentiments toward the company. In the past 60 days, earnings estimates for 2018 has been raised by 10 brokerage firms while that for 2019 have been raised by seven and lowered by one. Currently, the Zacks Consensus Estimate for earnings stands at $1.74 for 2018 and $2.19 for 2019, reflecting growth of 2.4% and 3.3% from the respective 60-day-ago tallies. Further, these estimates represent year-over-year growth of 27.9% for 2018 and 25.9% for 2019.
MSA Safety Incorporporated Price and Consensus