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Flowserve Beats on Earnings; Guides Narrower - Analyst Blog
Flowserve Corporation ( FLS ) reported third quarter 2013 earnings per share of 90 cents, which beat the Zacks Consensus Estimate of 84 cents by 7.1%. Quarterly earnings also grew 22% year over year excluding the impact from currency fluctuation. The company's net income increased to $126.3 million, up 18.8% from $106.3 million in the prior-year quarter.
Earnings were primarily driven by continued growth in bookings, improvement in both sales and margin figures, and reduced share counts. In addition, the company's key initiatives such as 'One Flowserve' has also helped in margin expansion, thereby driving EPS growth.
Total revenue in the quarter increased 5.4% to $1,229 million. Excluding the currency impact, revenues climbed 6.4% year over year. The improvements in sales were due to a stable aftermarket performance, focus on supply chain and operational excellence along with the company's ongoing cost-management efforts. Moreover, revenues beat the Zacks Consensus Estimate of $1,217 million.
Engineered Product Division ( EPD ) revenues for the quarter were $651.4 million, up 14.8% year over year (up 17.8% excluding the impact on constant currency basis), aided by a strong increase in original equipment sales. Bookings for the segment surged 20.2% to $665.3 million. Excluding the currency impact, bookings increased 20.9%.
Industrial Product Division ( IPD ) sales for the third quarter came in at $222.4 million, declining 8.7% year over year. Bookings for the segment were down 19.4% year over year to $228.5 million.
Flow Control Division ( FCD ) revenues were $394.4 million - a marginal decline of 0.1% year over year. Bookings for the segment also slipped 2.1% to $373.2 million.
Gross margin for the quarter grew 100 bps to 34.4%. The EPD segment's gross margin was 33.7% (down 20 bps) and the IPD segment's gross margin was 25.5% (up 120 bps). The FCD segment's gross margin moved north 200 bps to 37.4%. The rise in segmental gross margin was primarily due to significant growth in OE (Original Equipments) bookings, improvement in execution of operational plans and cost-control initiatives. Operating margin also increased 150 bps to 15.7%.
Balance Sheet and Cash Flow
The company ended the quarter with cash and cash equivalents of $113.7 million compared with $304.3 million as of Dec 31, 2012. The company had a long-term debt of $839.2 million compared with $869.1 million at year-end 2012.
The company's net cash flow from operating activities was $108.9 million at the end of the nine-month period ended on Sep 30.
Flowserve narrowed its 2013 EPS guidance from the previous range of $3.20 to $3.53 to $3.33 to $3.53 at present.
Flowserve's OE business is showing a positive trend with an increasing number of pre-FEED, FEED and EPC contracts going forward. Moreover, Flowserve aims to strategically deploy cash on long-term projects that will likely increase shareholders' wealth. In the long-run, the company plans to invest in accretive acquisitions. We commend the company's key strategies such as focus on driving organic growth, operational efficiencies, capital deployment and improving working capital metrics.
Flowserve currently has a Zacks Rank #4 (Sell). Other players in the same industry that are worth a look include Electronic for Imaging Inc . ( EFII ), Colfax Corporation ( CFX ) and Parker-Hannifin Corporation ( PH ). While Electronic for Imaging carries a Zacks Rank #1 (Strong Buy), Colfax and Parker have a Zacks Rank # 2 (Buy) each.
COLFAX CORP (CFX): Free Stock Analysis Report
ELECTRN IMAGING (EFII): Free Stock Analysis Report
FLOWSERVE CORP (FLS): Free Stock Analysis Report
PARKER HANNIFIN (PH): Free Stock Analysis Report
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