Flowserve Corporation (FLS): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report

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Summary:
Flowserve develops and manufactures precision-engineered flow control equipment. We are reaffirming our Neutral recommendation on the company with a target price of $79.00. The company reported soft second-quarter 2014 results with earnings and revenues both lagging Zacks Consensus Estimates. However, earnings increased 7.1% year over year despite a 1.5% decline in revenues. Flowserve has been strengthening its core business through key initiatives such as One Flowserve'. Other positives include continued growth in bookings and improvement in margin figures. However, unfavorable currency translations and short-term realignment expenses are proving to be a drag on company's financials.

Overview:

Flowserve Corporation is a leading manufacturer and aftermarket service provider of comprehensive flow control systems, globally. Flowserve develops and manufactures precision-engineered flow control equipment, such as pumps, valves, and seals, for critical service applications that require high reliability. The company uses its manufacturing platform to offer a broad array of aftermarket equipment services, such as installation, advanced diagnostics, repair, and retrofitting. The company uses a footprint of Quick Response Centers (QRCs) around the globe to deliver these aftermarket services.

Flowserve sells its products and services to more than 10,000 companies, including some of the world's leading engineering and construction firms, original equipment manufacturers, distributors and end users. Its products and services are used in several distinct industries across a broad geographic reach.

The business is organized into three segments:

Engineered Product Division (EPD) (approximately 51% of revenues for fiscal 2013 were generated through this segment). This is the largest segment of Flowserve, that designs, manufactures, distributes and services engineered pumps and pump systems, mechanical seals, auxiliary systems and provide related services. Engineered Product Division includes longer lead-time, highly engineered pump products and mechanical seals. It also manufactures replacement parts and related equipment, and provides a full array of support services. Oil and gas, petrochemical and power generation industries are the prime areas of operation of the segment.

The segment's operation is spread across twenty-seven manufacturing facilities worldwide, of which ten are located in Europe, eight in North America, five in Asia and four in Latin America. It also has 125 service centers in 39 countries, including those co-located in a manufacturing facility.

The company manufactures a portion of its products through strategic foreign joint ventures. In recent years, Flowserve has focused these strategic joint venture relationships in Austria, China and the Middle East. These relationships provide numerous strategic opportunities, including increased access to current and new markets, access to additional manufacturing capacity and expanding the operational platform to support low-cost sourcing initiatives and capacity demands for other markets.

Industrial Product Division (IPD) (19%) The segment is engaged in designing, manufacturing, distributing and servicing of pre-configured pumps and pump systems, including submersible motors. Industrial Product Division also manufactures replacement parts and related equipment, and provides a full array of support services. Oil and gas, chemical, water management, power generation and general industries are the prime areas of operation for IPD and include standardized, general purpose pump products.

Out of its twelve manufacturing facilities worldwide, three are located in the US and six in Europe. The segment also has twenty-two QRCs worldwide, of which ten are in Europe and three in the US.

Flow Control Division (FCD) (30%). FCD, the second largest business segment within Flowserve, designs, manufactures and distributes and services a broad portfolio of engineered and industrial valves, control valves, actuators, controls and related services. FCD leverages its experience and application know-how by offering a complete menu of engineered services to complement its expansive product portfolio. FCD products used to control, direct and manage the flow of liquids and gases are an integral part of any flow control system.

Flow control products are primarily used by companies that operate in the chemical (including pharmaceutical), power generation (nuclear, fossil, coal gasification and renewable), oil and gas, water and general industries, including aerospace, pulp and paper and mining. FCD has 48 manufacturing sites and QRCs in 22 countries worldwide, with only five of its 19 manufacturing operations located in the U.S.


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Stocks

Referenced Stocks: EPD , FLS , IPD

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