Flowserve Corporation FLS reported second-quarter 2015 adjusted earnings per share of 80 cents, beating the Zacks Consensus Estimate of 79 cents by a penny.
Reported earnings for the quarter stood at 56 cents, which came below the year-ago figure of 90 cents. This was mainly due to negative effects of foreign currency translations, SIHI dilution and the company’s realignment measures. In the wake of persisting operational hurdles, Flowserve trimmed its 2015 adjusted earnings guidance for the second time, this year.
Quarter in Detail
Revenues dipped 5.1% year over year to $1.16 billion but surpassed the Zacks Consensus Estimate of $1.13 million. Dismal year-over-year performance was mainly led by a drastic decline in spending in the company’s served end market, volatility in oil and gas markets. This apart, strengthening of the U.S. dollar proved to be a major headwind. Aftermarket sales represented about 42% of the quarterly sales and came in at $492 million.
The company’s total bookings stood at $1.12 billion for the second quarter of 2015, reflecting a 7% sequential rise. Excluding SIHI’s contribution, bookings rose 11.3% sequentially.
Flowserve’s operating income in the quarter was $127.6 million, down from $194.3 million a year ago.
Segment Results
Engineered Product Divisionrevenues for the quarter decreased 10.8% year over year to $570.8 million. Bookings were down 25.1% to $575.3 million compared with the prior-year quarter.
Also, Flow Control Division sales declined 12.3% year over year to $356.4 million. Bookings also fell 15.8% year over year to $355.5 million.
Nevertheless, Industrial Product Division segment’s sales were up 28.0% year over year to $260.8 million. However, bookings slipped 6.5% to $205.3 million. The improvement in sales was largely attributable to benefits reaped from the SIHI acquisition.
Balance Sheet and Cash Flow
The company ended the quarter with cash and cash equivalents of $315.3 million compared with $450.4 million as of Dec 31, 2014. Long-term debt stood at $1.63 billion as of Mar 31, 2015, compared with $1.10 billion as of Dec 31, 2014.
Flowserve’s net cash flow provided by operating activities was $18.1 million for the six months ended Jun 30, 2015, as compared with net cash flow used in operating activities of $11.3 million in the prior-year period.
Outlook
Due to strong currency headwinds, seasonality in demand and unfavorable business outlook, Flowserve has again reduced the 2015 adjusted EPS guidance. The company now projects it in the range of $3.10–$3.40 from the previously projected range of $3.25–$3.65. The Zacks Consensus Estimate of $3.28 lies within the new range.
Our Take
Although Flowserve’s second-quarter adjusted earnings and revenues figures managed to surpass the Zacks Consensus Estimate, the year-over-year declines are certainly not impressive. Still pursued by the same old issues, Flowserve has little to be cheerful about in the near term.
Flowserve currently has a Zacks Rank #4 (Sell). Better-ranked players in the same sector include Graco Inc. GGG, Atlas Copco AB ATLKY and Nordson Corporation NDSN. All the stocks carrya Zacks Rank #2 (Buy).
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