Flowserve (FLS) Displays Solid Prospects Amid Headwinds
Flowserve Corporation FLS has been benefiting from strength across its general Industrial, oil & gas, chemical, power and water management end markets. In the quarters ahead, the company stands to benefit from strength across these end markets, coupled with a solid backlog level and strong backlog conversion capability. Exiting the fourth quarter of 2021, its backlog was strong at $2 billion. For 2022, it anticipates revenues to increase in the range of 7-9% on a year-over-year basis.
The company’s strong liquidity position adds to its strength. Exiting 2021, FLS’ total available liquidity comprised cash and cash equivalents of $658 million and $614 million of available capacity under its revolving credit facility. Also, it generated $195 million of free cash flow in 2021. Further, its focus on working capital improvement enabled it to deliver a free cash flow conversion of 108% of its net income in 2021.
Flowserve remains focused on rewarding shareholders through share repurchases and dividend payouts. In 2021, it paid out dividends worth $104.6 million and repurchased common shares worth $17.5 million.
However, its high-debt profile remains a concern. At the end of fourth-quarter 2021, its long-term debt remained high at $1,261.8 million. In 2021, interest expenses jumped 2.5% on a year-over-year basis to $57.6 million. For 2022, it anticipates interest expenses to be in the range of $45-$50 million.
The company has also been experiencing the adverse impacts of labor shortage, logistics issues and supply-chain woes. Also, its realignment plan has been fueling expenses and adversely impacting profitability. For instance, in the fourth quarter, its realignment expenses had an adverse impact of 1 cent per share on net income.
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In the past six months, this Zacks Rank #3 (Hold) stock has lost 3.1% compared with the industry’s decline of 9.8%.
Stocks to Consider
Some better-ranked companies from the same space are discussed below.
Nordson Corporation NDSN presently carries a Zacks Rank #2 (Buy). The company delivered a four-quarter earnings surprise of 9.85%, on average.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Nordson’s earnings estimates have increased 0.4% for fiscal 2022 (ending October 2022) in the past 30 days. Its shares have lost 6.1% in the past six months.
Standex International Corporation SXI presently has a Zacks Rank #2. Its earnings surprise in the last four quarters was 5.85%, on average.
In the past 30 days, Standex’s earnings estimates have been stable for fiscal 2022 (ending June 2022). SXI’s shares have gained 4.2% in the past six months.
Ferguson plc FERG presently carries a Zacks Rank #2. Its earnings surprise in the last four quarters was 14.19%, on average.
In the past 30 days, Ferguson’s earnings estimates have increased 5.9% for fiscal 2022 (ending July 2022). FERG’s shares have gained 0.4% in the past six months.
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