Shares of Flowserve Corporation FLS have lost 46.1% compared with the industry’s decline of 14.8% year to date. The decrease in share price primarily reflects the adverse impacts of the coronavirus pandemic, and weak oil and gas end markets on the company’s operational performance.
Flowserve currently carries a Zacks Rank #5 (Strong Sell).
Factors Affecting the Company
Flowserve has been experiencing weakness in both aftermarket and original equipment businesses due to reduced bookings. For instance, the company’s first-quarter 2020 overall bookings declined 8.4% (or 6.6% on a constant-currency basis) year over year, owing to a low demand environment on account of weakness in upstream, midstream and downstream oil and gas end markets. It believes that difficult end-market conditions will continue to affect its top-line performance in 2020. Also, the company expects challenging conditions at the chemical end market amid the coronavirus outbreak to affect its performance. In addition, several of its manufacturing facilities have been suffering from temporary shutdowns, owing to the outbreak.
Also, the company’s realignment and transformation expenses adversely impacted its net income by 10 cents per share in the first quarter of 2020. The realignment measures, though are anticipated to benefit in the long run, are adding to its expenses.
Moreover, at the end of first-quarter 2020, the company’s total debt-to-capital increased to 47.9% from 46.3% recorded at the end of fourth-quarter 2019. Also, net interest and other expenses in the quarter recorded an increase of 8.1% year over year to $13.4 million. Further, an increase in debt levels can raise the company’s financial obligations.
Further, given its extensive geographic presence, the company is exposed to geopolitical risks and headwinds arising from unfavorable movements in foreign currencies. For instance, in the first quarter, unfavorable foreign exchange movements hurt its top-line performance by 1.7%.
Stocks to Consider
Some better-ranked stocks are Activision Blizzard, Inc. ATVI, Broadwind Energy, Inc. BWEN and Graphic Packaging Holding Company GPK. While Activision Blizzard currently sports a Zacks Rank #1 (Strong Buy), Broadwind Energy and Graphic Packaging carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Activision Blizzard delivered a positive earnings surprise of 31.34%, on average, in the trailing four quarters.
Broadwind Energy delivered a positive earnings surprise of 50.00%, on average, in the trailing four quarters.
Graphic Packaging delivered a positive earnings surprise of 9.59%, on average, in the trailing four quarters.
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