On Tuesday, Goldman Sachs reiterated its Sell rating on Flowserve Corp . (NYSE:FLS) shares with a consistent price target of $52.00. The firm's analyst highlighted a mixed performance in the company's third-quarter results, noting that earnings per share (EPS) of $0.62 were below the expected $0.67. This shortfall was attributed to a discrete asbestos charge that impacted the earnings by $0.07.
Despite the lower-than-anticipated EPS, Flowserve demonstrated strength in bookings, marking the second consecutive quarter with $1.2 billion in bookings, including over $100 million in Nuclear awards. The Aftermarket segment also showed resilience with bookings exceeding $600 million once again.
Flowserve's financial performance in the third quarter showed some disparity with strong bookings offset by an earnings miss due to unforeseen charges. The bookings success, particularly in the Nuclear sector and Aftermarket services, indicates robust demand for the company's offerings. However, the discrete asbestos charge took a toll on the company's earnings, causing them to fall short of consensus expectations.
The company has confirmed its full-year guidance, but Goldman Sachs anticipates that Flowserve will likely achieve results closer to the mid-point of the projected range of $2.60 to $2.75, rather than the higher $2.76 consensus. This adjustment in expectation reflects the impact of the third quarter's earnings miss and the associated charge that influenced the results.
Investors and analysts are looking forward to additional information that will be provided in the upcoming conference call scheduled for the following day. The details shared during the call are expected to further clarify the company's outlook and performance trajectory.
Goldman Sachs' assessment suggests that Flowserve's stock movement will correlate with the direction of its earnings trajectory following this quarterly report. The firm's maintained Sell rating and price target reflect a cautious outlook on the company's stock performance in the near term.
In other recent news, Flowserve Corporation (NYSE:FLS) disclosed third-quarter earnings that did not meet analyst expectations, coupled with a less than promising full-year guidance. The company reported adjusted earnings per share of $0.62 for Q3, falling short of the consensus estimate of $0.67.
However, the revenue of $1.13 billion was in line with analyst projections and marked a 3.5% YoY increase. Flowserve reaffirmed its full-year 2024 adjusted EPS guidance range of $2.60 to $2.75, which is lower than the Wall Street consensus of $2.76.
In addition, Flowserve recently completed the acquisition of MOGAS Industries, although this development is not included in the company's revenue growth forecast of 4% to 6%. Bookings saw a significant increase, with total bookings rising 12.7% YoY to $1.20 billion, and the company's backlog also grew 3.7% sequentially to $2.8 billion.
Despite the earnings miss, Flowserve reported improved margins, with adjusted gross margin rising 270 basis points YoY to 32.4% and adjusted operating margin increasing 240 basis points to 11.1%. These recent developments highlight a mix of challenges and advancements in Flowserve's operational performance.
InvestingPro Insights
Flowserve Corp. (NYSE:FLS) presents a mixed financial picture, aligning with Goldman Sachs' recent analysis. According to InvestingPro data, the company's market capitalization stands at $6.95 billion, with a P/E ratio of 27.15. This relatively high P/E ratio is consistent with Goldman's cautious stance, as it suggests the stock may be trading at a premium relative to its earnings.
InvestingPro Tips highlight that Flowserve has maintained dividend payments for 18 consecutive years, demonstrating a commitment to shareholder returns despite challenges. This consistency in dividends could be appealing to income-focused investors, even as Goldman maintains a Sell rating.
The company's financial health appears stable, with InvestingPro noting that liquid assets exceed short-term obligations and that Flowserve operates with a moderate level of debt. This financial stability may provide some reassurance to investors concerned about the recent earnings miss discussed in the article.
Interestingly, while Goldman expects results to be closer to the mid-point of the guidance range, an InvestingPro Tip indicates that net income is expected to grow this year. This growth expectation, along with the fact that 4 analysts have revised their earnings upwards for the upcoming period, suggests there may be some optimism about Flowserve's future performance not fully captured in Goldman's analysis.
For investors seeking a more comprehensive view, InvestingPro offers additional tips and insights that could provide a broader perspective on Flowserve's investment potential.
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