Flowserve Corp. FLS reported relatively healthy third-quarter 2017 with GAAP earnings of $47.6 million or 36 cents per share as against a loss of $15.8 million or loss of 12 cents per share in the year-earlier quarter. The year-over-year improvement was primarily attributable to lower operating expenses.
Adjusted earnings for the reported quarter were 37 cents per share, which exceeded the Zacks Consensus Estimate by 3 cents.
Flowserve Corporation Price, Consensus and EPS Surprise
Flowserve Corporation Price, Consensus and EPS Surprise | Flowserve Corporation Quote
Quarter in Detail
Revenues fell 6.6% year over year to $883.4 million due to sluggish progress of the Industrial Product Division turnaround and foreign currency headwinds. Quarterly revenues, however, beat the Zacks Consensus Estimate of $865 million.
The company’s bookings totaled $893 million in the third quarter, down 6.9% year over year owing to divested businesses. After-market bookings totaled $454 million, up 0.5%. Growth in bookings came on the back of modest recovery in the oil & gas industry and higher original equipment bookings.
Adjusted gross margin was 31.9% for the reported quarter compared with 32.8% in the year-ago quarter. Operating income of the company improved massively to $74 million from $0.1 million in the year-ago period. Adjusted operating margin for the quarter was 9.3% compared with 12.3% for the prior-year period.
Segmental Results
Engineered Product Division revenues were down 7.5% year over year to $424.2 million in the quarter. Negative currency translation effects and divested businesses crippled sales in this segment. Bookings declined 13.1% to $432.5 million.
Sales at the Flow Control Division decreased 3.9% year over year to $287.7 million, marred by currency headwinds and soft customer original equipment sales in key end markets. Bookings of this segment totaled $285.9 million, down 2.1%.
Industrial Product Division sales were down 6.7% year over year to $189.7 million. Foreign currency headwinds, along with low original equipment sales, resulted in the decline across all main geographies. Bookings totaled $196.9 million, up 3.9%.
Balance Sheet & Cash Flow
Flowserve ended the quarter with cash and cash equivalents of $502.1 million compared with $367.2 million as of Dec 31, 2016. As of Sep 30, 2017, the company’s long-term debt totaled $1,506.1 million, up from $1,485.3 million as of Dec 31, 2016.
Net cash flow from operating activities was $72.4 million for the first nine months of 2017, up from $70.9 million recorded in the prior-year period.
Outlook Trimmed
Flowserve narrowed its 2017 guidance and now expects adjusted earnings per share to lie in the band of $1.30-$1.40 (previous guidance: $1.30-$1.50). It currently estimates revenues to decline in the range of 7-9% (previous guidance: 6-10% decline).
The company remains well positioned to pursue operational improvements as part of its restructuring strategy. Management expects that Flowserve will be better positioned to capitalize on growth opportunities as market conditions improve. The company remains focused on simplifying its business model, becoming market led and customer focused while driving an efficient and flexible cost structure.
Zacks Rank & Stocks to Consider
Flowserve currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the industry include Kadant Inc. KAI, Sun Hydraulics Corporation SNHY and Twin Disc, Incorporated TWIN, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Kadant topped estimates in each of the trailing four quarters with an average earnings surprise of 20.3%.
Sun Hydraulics has a positive earnings history, beating estimates twice in the trailing four quarters with an average earnings surprise of 3.5%.
Twin Disc has beaten earnings estimates once in the trailing four quarters with an average positive surprise of 124%.
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