On Tuesday, BofA Securities maintained its Buy rating for Flowserve Corp . (NYSE:FLS), with a steady price target of $60.00. The endorsement followed the announcement on September 20 that the Three Mile Island nuclear power plant is slated to reopen in 2028, which is projected to bolster Pennsylvania's GDP by $16 billion over two decades.
The decision to restart the facility comes amid rising concerns over the increasing demand for electricity, particularly from data centers and artificial intelligence operations.
"We estimate Flowserve™s nuclear exposure is the most meaningful in our coverage, contributing ~3-4% in total sales," said BofA analysts.
The reopening of Three Mile Island, which will supply power to Microsoft (NASDAQ:MSFT)'s data centers, is expected to drive an increased demand for nuclear energy. This anticipated rise in demand has not been factored into Flowserve's long-term growth projections, which currently forecast mid-single-digit growth.
The analysts pointed out that the profitability from the nuclear segment exceeds the average for the company's Power division. This suggests that the upcoming surge in nuclear demand could provide an opportunity for Flowserve to exceed its growth forecasts for the years leading up to 2026 and 2027.
In other recent news, Flowserve Corporation (NYSE:FLS) has declared a quarterly cash dividend of $0.21 per share, maintaining its regular dividend payout strategy. In a significant development, the company has also agreed to acquire MOGAS Industries, a Houston-based manufacturer of severe service valves, for $290 million. This acquisition is expected to double Flowserve's exposure to the direct mining and mineral extraction sectors and be accretive to the company's adjusted earnings per share in the first year after closing.
In the second quarter, Flowserve reported an over 40% increase in earnings per share and a revenue rise of over 7%. This robust performance was acknowledged by analyst firms TD Cowen, Baird, and Mizuho, all of which updated their price targets for Flowserve. Particularly, Mizuho maintained its Outperform rating on Flowserve and raised its price target from $53 to $58, revising its estimated earnings per share for the company upwards for 2024 and 2025.
InvestingPro Insights
As Flowserve Corp. (NYSE:FLS) positions itself to capitalize on the nuclear sector's growth, InvestingPro data indicates a robust financial outlook. The company's market capitalization stands at $6.38 billion, underscoring its significant presence in the industry. With a P/E ratio of 24.92, investors may find the stock trading at a premium compared to near-term earnings growth, but it's important to note that Flowserve has maintained dividend payments for 18 consecutive years, reflecting a stable return to shareholders. Additionally, the company's revenue growth over the last twelve months is at 13.39%, showcasing its ability to expand effectively.
InvestingPro Tips highlight that Flowserve is expected to see net income growth this year, with analysts predicting the company to be profitable during this period. Moreover, Flowserve's liquid assets exceed its short-term obligations, providing financial flexibility. While seven analysts have revised their earnings downwards for the upcoming period, the company operates with a moderate level of debt, which may mitigate some risks associated with these revisions. For those looking to delve deeper into Flowserve's financials, InvestingPro offers additional insights, including 8 more tips available at InvestingPro.
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