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Flowserve (FLS) to Report Q4 Earnings: What's in the Cards?

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Flowserve Corporation (FLS - Free Report) is scheduled to release fourth-quarter 2018 results on Feb 20, after the market closes.

This industrial machinery maker delivered better-than-expected results in one of the last four quarters while lagged estimates in two and posted in-line results in one. Average earnings surprise was a negative 5.62%. Notably, the company’s third-quarter earnings of 49 cents per share surpassed the Zacks Consensus Estimate of 42 cents.

In the past month, the company’s shares have increased 10.9%, outperforming the industry growth of 7.4%.

Let us see how things are shaping up for Flowserve this quarter.

Factors to Affect Q4 Results

Operating environment currently seems to be favorable for industrial product manufacturers and service providers in the United States. Among many, rising industrial production in the country — evident from 2.8% year-over-year growth registered in January 2018 to 3.8% growth in January 2019 — as well as healthy demand for machinery manufactured in the United States will prove advantageous for industrial product manufacturers. Also, technological advancements tend to keep demand strong for industrial products.

We believe that Flowserve is poised to gain from strengthening demand in end markets served; growing aftermarket business opportunities in pumps, seals and valves; expansion in emerging markets; and lower taxes. Further, initiatives to improve working environment for employees, drive operational excellence, effective utilization of global platforms and reduce complexity will work the company’s favor.

Increasing end-market prospects, rise in maintenance and upgrade in demand at refineries; expanding pre-FEED and FEED pipeline; and pickup in liquefied natural gas-related activities in North America will likely benefit Flowserve’s business in the oil and gas market. Conversely, higher growth in investments in ethylene and derivative facilities will spur business opportunities in the chemical market, and growth in the thermal solar market will benefit Flowserve in the power market. Also, higher distribution activities will increase growth prospects in the general industries.

Flowserve did not provide any separate projection for the fourth quarter. However, a look at the yearly forecast will fairly provide a picture for the to-be-reported quarter. Adjusted earnings per share are anticipated to be $1.65-$1.75 in 2018, reflecting year-over-year growth of 25%. Revenues will likely increase 5-7%.

Segmental performance will benefit from solid end-market businesses. The Zacks Consensus Estimate for revenues for the Engineered Product Division is pegged at $508 million for the fourth quarter of 2018, up 1.8% from the year-ago quarter reported figure. Revenue estimates for Flow Control Division are pegged at $347 million and for Industrial Product Division it is pinned at $208 million, up roughly 0.6% and down 3.3% from the respective year-ago quarter figures.

However, rising costs related to realignment expenses remain a concern for Flowserve. Also, high debt, competitive pressures and macroeconomic headwinds are creating headwinds.

Earnings Whispers

Our proven model provides some idea about the stocks that are about to release their earnings results. Per the model, a stock needs a combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for a likely earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

The case with Flowserve is provided below.

Earnings ESP: Flowserve has an Earnings ESP of +0.00%, with the Most Accurate Estimate and the Zacks Consensus Estimate pegged at 58 cents.

Flowserve Corporation Price, Consensus and EPS Surprise


Flowserve Corporation Price, Consensus and EPS Surprise | Flowserve Corporation Quote

Zacks Rank: Flowserve currently carries a Zacks Rank #3. This, when combined with Earnings ESP of 0.00%, makes earnings surprise prediction difficult.

Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing a negative estimate revisions momentum.

Stocks to Consider

Here are some companies in the Zacks Industrial Products sector that you may want to consider as these have the right combination of elements to post an earnings beat this quarter, according to our model.
Sharps Compliance Corp. (SMED - Free Report) has an Earnings ESP of +20% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Kennametal Inc. (KMT - Free Report) has an Earnings ESP of +1.68% and a Zacks Rank #3.

Ball Corporation (BLL - Free Report) has an Earnings ESP of +1.09% and a Zacks Rank #3.

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