Leading manufacturer and aftermarket service provider of comprehensive flow control systems, Flowserve Corporation (FLS), is expected to report third-quarter 2014 results on Oct 23, after the markets closes. Last quarter, the company posted a 2.2% negative surprise. Let’s see how things are shaping up for this announcement.
Factors to Consider
Although the company reported soft second-quarter results, it remains optimistic regarding its growth prospects driven by the strength in the aftermarket business, improvement in key end-markets, the scope for strategic mergers and acquisitions as well as its diligent operational execution. The company’s end markets have remained strong, reflecting growth in bookings. Moreover, the company’s One Flowserve culture is allowing it to reduce costs and thereby boost earnings.
Further, increasing demand for fresh water across the globe continues to create requirements for new facilities or upgrades of existing systems, most of which require products that Flowserve offers, particularly pumps. The company is also expanding worldwide and exploring new markets, especially the emerging ones.
Earnings Whispers?
Our proven model does not conclusively show that Flowserve will beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or at least 3 for this to happen. That is not the case here as you will see below.
Zero Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is currently pegged at 0.00%, as both these estimates stand at $1.00.
Zacks Rank: Flowserve’s Zacks Rank #3 (Hold) when combined with a 0.00% Earnings ESP makes surprise prediction difficult.
We caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Stocks to Consider
Here are some companies that investors may want to consider as our model shows that they have the right combination of elements to post an earnings beat this quarter:
Century Aluminum Co. (CENX) with an earnings ESP of +11.77% and a Zacks Rank #1 (Strong Buy).
Nordson Corp. (NDSN) with an earnings ESP of +0.88% and a Zacks Rank #2 (Buy).
Caterpillar Inc. (CAT) with an earnings ESP of +2.26% and a Zacks Rank #3.
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