Leading manufacturer and aftermarket service provider of
comprehensive flow control systems,
) reported second-quarter 2014 earnings per share of 90 cents,
missing the Zacks Consensus Estimate by a couple of cents. However,
earnings increased 7.1% from 84 cents per share in the prior-year
Flowserve Corporation - Earnings Surprise |
Bottom-line growth was driven by the company's endeavors to
strengthen its core business by key initiatives such as 'One
Flowserve'. The continued growth in bookings and improvement in
margin figures are also positives. This apart, the company has also
been containing costs.
Total revenue in the quarter was $1.22 billion, a decrease of
about 1.6% compared with the past-year figure of $1.24 billion.
Excluding the currency impact, revenues have declined 1.5% year
over year. Revenues also fell short of the Zacks Consensus Estimate
of $1.30 billion. The decline was due to adverse shipment timings.
Also, the company reported a year-over-year decline in all three of
Engineered Product Division
) revenues for the quarter decreased to $609.2 million, from $625.0
million in the prior-year quarter. However, bookings for the
segment increased 22.7% to $744.3 million.
Industrial Product Division
) sales for the second quarter decreased marginally to $238.1
million from $238.9 million. Bookings for the segment increased
18.6% year over year to $248.0 million.
Flow Control Division
) revenues were $406.4 million, a decline from $411.2 reported in
the year-ago quarter. Bookings for the segment also slipped 5.5% to
Gross margin for the quarter increased 110 basis points (bps) to
35.1% in the quarter. The EPD segment's gross margin was 34.5% (up
90 bps), the IPD segment's gross margin was 28.0% (up 200 bps) and
the FCD segment's gross margin stood at 37.6% (up 180 bps). The
rise in segmental gross margin was primarily due to significant
growth in aftermarket and OE (Original Equipments) bookings,
improvement in execution of operational plans and cost control
initiatives. Operating margin also increased 110 bps year over year
Balance Sheet and Cash Flow
The company ended the quarter with cash and cash equivalents of
$143.6 million compared with $363.8 million as of Dec 31, 2013. The
company had a long-term debt of $1.12 billion compared with $1.13
billion as of Dec 31, 2013.
The company's net cash flow from operating activities was a
negative $11.3 million at the end of the six-month period, narrowed
from negative $32.8 million in the prior-year period.
In the six-month period, the company returned about $195 million
to its investors' via share repurchases and dividends.
The company remains optimistic about its growth prospects driven
by the strength in its aftermarket business, improvement in key
end-markets, the scope for strategic mergers and acquisitions as
well as its diligent operational execution.
Flowserve reaffirmed its full-year 2014 earnings per share to
lie between $3.65 and $4.00. The Zacks Consensus Estimate for
earnings per share in 2014 is currently pegged at $3.88. However,
the company now expects revenue growth to be in the lower end of
the previously provided range of 3%-6%. The revenues are likely to
be negatively impacted by the unfavorable currency translations and
the last quarter's divestment of the Naval OY business unit.
Flowserve currently has a Zacks Rank #4 (Sell). Better-ranked
players in the same industry include
Blount International Inc.
The Babcock & Wilcox Company
EnPro Industries, Inc.
). All three stocks sport a Zacks Rank #1 (Strong Buy).
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