On Tuesday, Flowserve Corporation (NYSE:FLS) saw its price target increased to $46.00 from $44.00 by a Goldman Sachs (NYSE:GS) analyst, while the Sell rating on the stock was maintained. The adjustment follows Flowserve's second-quarter earnings, which surpassed expectations with segment EBIT results 14% and 18% higher than Goldman Sachs and FactSet consensus, respectively. The performance was bolstered by a robust 22% EBIT increase in the Flowserve Pump Division (FPD) against FactSet consensus figures.
Flowserve reported organic growth that exceeded forecasts, with original equipment (OE) sales up 9.8% organically and aftermarket (AM) sales climbing 5.8% year-over-year. The company ended the quarter with a backlog of $2.7 billion and bookings of $1.25 billion, marking a 13% increase from the previous year and achieving a book-to-bill ratio of 1.08. Additionally, management expressed confidence in their robust project pipeline, which grew by 8% year-over-year in the second quarter, with the Power sector alone witnessing a 22% increase, particularly noting strong demand in the Middle East.
In response to the positive results, Flowserve has raised its full-year 2024 earnings guidance to a range of $2.60 to $2.75, up from the previous forecast of $2.50 to $2.70. The company also reaffirmed its revenue growth guidance of 4 to 6% for the year. This upward revision is supported by the expectation that large projects booked in the second quarter will be recognized in 2025. The Goldman Sachs analyst acknowledged the company's record trends in the aftermarket segment and improved execution, considering the top end of the guidance to be reasonable.
Despite a free cash flow (FCF) deficit of $27 million in the quarter, Flowserve's management has committed to achieving an FCF conversion rate of over 80% for the year. Although Goldman Sachs continues to recommend a Sell rating on Flowserve, citing better risk/reward opportunities in other coverage areas, the firm recognizes the progress Flowserve has made over the past year. The new price target of $46 suggests a free cash flow yield of approximately 5.5% for 2025.
In other recent news, Flowserve's bookings rose to $1.25 billion, the highest quarterly level since 2014, propelled by record aftermarket activity of more than $610 million. Adjusted gross and operating margins also saw a notable increase, up by 200 and 210 basis points respectively, compared to the previous year.
InvestingPro Insights
Flowserve Corporation's (NYSE:FLS) recent performance has caught the attention of analysts and investors alike. According to real-time data from InvestingPro, Flowserve boasts a market capitalization of $6.48 billion and has shown impressive revenue growth of 17.31% in the last twelve months as of Q1 2024. This growth is complemented by a notable 25.34% price total return over the past six months, signaling strong investor confidence.
InvestingPro Tips highlight that Flowserve has maintained dividend payments for an impressive 18 consecutive years and currently offers a dividend yield of 1.65%. This consistency in rewarding shareholders, coupled with the company's ability to keep liquid assets above short-term obligations, suggests a stable financial footing. Moreover, analysts predict the company will be profitable this year, which is supported by a robust gross profit margin of 30.39% in the last twelve months as of Q1 2024. For those looking to delve deeper into Flowserve's financial health, InvestingPro offers several additional tips to guide investment decisions.
Investors interested in Flowserve's potential can explore these insights further on InvestingPro's platform. For a more comprehensive analysis, use coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, and gain access to the full array of InvestingPro Tips for Flowserve.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.