Executive Summary:
Flowserve Corporation is a leading American multinational supplier of industrial machinery for various industries. Founded in 1997, the company offers a wide range of products including pumps, valves, seals and automation tools. With a presence in over 56 countries, Flowserve employs around 16,000 people and caters to sectors like power, oil, gas and chemicals.
Flowserve reported and Adjusted Earnings Per Share (EPS) of 56 cents and 58 cents. This represents an impressive 180% and 45% year-over-year increase.
Stock Overview:
| Ticker | $FLS | Price | $50.41 | Market Cap | $6.64B |
| 52 Week High | $50.49 | 52 Week Low | $32.49 | Shares outstanding | 131.65M |
Company background:
Flowserve Corporation has a heritage positions it as a world leader in manufacturing and delivering fluid motion control solutions for critical applications.
Flowserve offers a comprehensive portfolio of products catering to various industries. Their core offerings include engineered and industrial pumps, valves, and seals, along with automation and aftermarket services. These products play a vital role in global infrastructure projects, spanning sectors like oil and gas, power generation, water management, and chemical processing. Flowserve’s expertise extends to developing sustainable solutions, aligning with their goal of building a more sustainable future.
Their workforce of over 16,000 associates is dedicated to providing innovative flow control products and services, supported by a network of quick-response centers offering aftermarket parts and services.
Recent Earnings:
Flowserve’s Earnings per Share (EPS) reached 56 cents, reflecting a substantial 180% increase. Adjusted EPS also came in strong at 58 cents, up 45% compared to the first quarter of 2023.
Flowserve’s positive performance led them to raise their full-year 2024 Adjusted EPS guidance to a range of $2.50 to $2.70.
The Market, Industry, and Competitors:
Flowserve supplies equipment to various industries, including oil & gas, power generation, and chemicals. The global oil & gas market is projected to grow at a CAGR of 2.5% by 2025. The power generation market is anticipated to reach $840.5 billion by 2026, indicating a steady increase. This bodes well for Flowserve’s potential growth, as their products are essential for these industries’ operations.
Flowserve itself has recently reported strong performance, with positive growth in both original equipment and aftermarket sales.
Unique differentiation:
Schlumberger: A multinational oilfield services company that also offers a range of flow control products, including valves, pumps, and meters. Schlumberger’s vast reach and expertise in the oil and gas industry make them a strong competitor for Flowserve.
Emerson Electric: A diversified industrial automation company with a significant presence in flow control technologies. Emerson offers a broad portfolio of valves, regulators, and automation solutions that compete directly with Flowserve’s offerings across various industries.
Dover Corporation: A diversified industrial manufacturer with a segment dedicated to engineered products, including pumps and compressors. Dover’s focus on innovation and global presence position them as a threat to Flowserve’s market share.
Heritage and Expertise: Flowserve boasts a rich history dating back to 1790 through its legacy brands. This heritage positions them as a leader with extensive experience in the flow control industry.
Comprehensiveness: Flowserve offers a comprehensive portfolio of products encompassing pumps, valves, seals, and automation tools. This one-stop-shop approach might be attractive to clients seeking a complete solution provider.
Aftermarket Services: Flowserve emphasizes aftermarket support, providing essential parts and services to keep their clients’ operations running smoothly. This focus on customer lifecycle value can be a key differentiator.
Sustainable Solutions: Flowserve’s commitment to developing sustainable solutions aligns with the growing focus on environmental responsibility. This could be a positive differentiator, especially for attracting environmentally conscious clients.
Management & Employees:
R. Scott Rowe: President and Chief Executive Officer. He brings extensive experience in the flow control industry, having previously served as President of the Cameron Group.
Amy B. Schwetz: Senior Vice President and Chief Financial Officer. She is responsible for overseeing Flowserve’s financial activities.
Susan C. Hudson: Senior Vice President, Chief Legal Officer & Corporate Secretary. She manages Flowserve’s legal affairs and corporate governance.
Financials:
Flowserve’s earnings haven’t skyrocketed, but they haven’t dipped significantly either. Flowserve’s balance sheet health is another crucial aspect of its financial performance. The company’s ability to raise its full-year 2024 EPS guidance in Q1 2024 suggests a degree of financial stability and confidence in their future performance.
Technical Analysis:
Shares are in Stage 2 Markup on the monthly, weekly and daily chart, but on the daily chart, the RSI and MACD are both showing signs of fatigue, which indicates a touchback to $46 – $48 zone is likely. The stock will be a better swing entry in the $44 zone.
Bull Case:
Industry Growth: Flowserve operates in several industries expected to see moderate growth in the coming years. The oil & gas, power generation, and chemical sectors are prime examples, and continued activity in these areas would translate to a demand for Flowserve’s products.
Strong Q1 2024 Performance: Flowserve’s recent earnings report for Q1 2024 showed significant year-over-year growth in EPS, with both reported and adjusted figures exceeding expectations.
Potential for Value Investment: While growth may not be explosive, Flowserve’s recent performance and historical reputation suggest potential value for investors seeking a stable company with a track record of accomplishment.
Bear Case:
Fluctuations in Key Markets: Flowserve relies on the health of industries like oil & gas, power generation, and chemicals. Downturns in these sectors could significantly impact demand for Flowserve’s products and lead to revenue shortfalls.
Uncertain Economic Conditions: Broader economic factors like inflation, rising interest rates, or recessions could dampen overall industrial activity, hindering Flowserve’s sales and profitability.
Valuation Concerns: Depending on the current stock price, Flowserve might not be priced attractively for investors seeking high-growth potential. Their value proposition might be more suited for those seeking stability and a decent dividend yield.
