Flowserve Corporation (FLS) is expected to benefit from the strong synergies from the acquisition of the Netherland-based SIHI Group B.V, disclosed in early November. This buyout is anticipated to enhance Flowserve’s Industrial Product Division segment margins by 14%–15% by leveraging on the economies of scale. Hence, we are encouraged by this SIHI buyout and project bright growth prospects for Flowserve.
Moreover, Flowserve has consistently returned capital to shareholders in the form of share repurchases and dividend. In November, Flowserve authorized a replenished share buyback worth $500 million, thereby boosting investors’ confidence in the stock. Also, in the third quarter, the company has expended about $65 million for share repurchases and dividends payouts.
However, Flowserve’s business spread across the globe is prone to be impacted by unfavorable currency translations. The company’s earnings included an adverse currency translation impact of 3 cents per share, in the third quarter 2014. Further, the company expects 2014 revenue growth to be in the lower half of the previously projected range of 3%-6%.
Also, Flowserve’s business is being impacted by increasing expenses owing to the ongoing restructuring activities. Costs from the divestment of the Naval business in the second quarter 2014 is expected to have a negative impact on the company’s financial for the rest of this year.
To gain deeper insight into Flowserve, you can refer to our updated research report, which was issued on Dec 19, 2014.
Over the last 30 days, the Zacks Consensus Estimate for 2014 earnings per share remained stable at $3.75. However, for 2015, it dipped by 5 cents to $4.15. The stock currently has a Zacks Rank #4 (Sell).
Stocks That Warrant a Look
Better-ranked stocks worth considering in the industry include Blount International Inc. (BLT), Middleby Corp. (MIDD) and Sun Hydraulics Corp. (SNHY). All stocks carry a Zacks Rank #1 (Strong Buy).
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