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Reasons Why You Should Avoid Investing in Flowserve (FLS)

Flowserve Corporation FLS is persistently grappling with supply-chain constraints, rising raw material costs and foreign-currency headwinds.

FLS has a market capitalization of $3.2 billion. The stock currently carries a Zacks Rank #4 (Sell).

Factors Affecting Flowserve

Flowserve is experiencing weakness in its original equipment business due to supply-chain challenges, logistics problems and labor issues. In the second quarter of 2022, its original equipment sales were down 5.8% year over year. In the quarter, its adjusted operating margin also declined 120 basis points on a year-over-year basis. These adversities may dampen FLS’ performance in the near term.

FLS’ high-debt profile raises a concern. Its long-term debt was high at $1,241.6 million at the end of second-quarter 2022. Fresh issuances of debt instruments in the near term might inflate Flowserve’s financial obligations and hurt profitability.

Though Flowserve’s realignment plans are likely to provide benefits in the long run, the same is fuelling its expenses and adversely impacting its profitability. FLS’ net income might be affected by realignment expenses in the coming quarters. It expects to incur realignment expenses of $10 million in 2022. The bottom line might be hurt by incremental expenses in the quarters ahead.

Given its widespread presence in the international markets, FLS is exposed to unfavorable foreign currency movements. For instance, in second-quarter 2022, foreign exchange headwinds adversely impacted its sales by $41 million. A stronger U.S. dollar might depress FLS’ overseas business results in the quarters ahead.

Flowserve Corporation Price and Consensus

Flowserve Corporation Price and Consensus
Flowserve Corporation Price and Consensus

Flowserve Corporation price-consensus-chart | Flowserve Corporation Quote

In the past 60 days, the Zacks Consensus Estimate for 2022 earnings has been revised 10.5% downward.

Stocks to Consider

Some better-ranked companies from the Industrial Products sector are discussed below:

Enerpac Tool Group Corp. EPAC presently sports a Zacks Rank #1. EPAC delivered a trailing four-quarter earnings surprise of 3.4%, on average. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks.

EPAC’s earnings estimates have increased 9.1% for fiscal 2023 (ending August 2023) in the past 60 days. Its shares have gained 12.6% in the past three months.

IDEX Corporation IEX presently has a Zacks Rank #2 (Buy). IEX’s earnings surprise in the last four quarters was 2.1%, on average.

In the past 60 days, IDEX’s earnings estimates have increased 0.1% for 2022. The stock has rallied 13.3% in the past three months.


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