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Why Shares of Flowserve Surged on Friday

By Lou Whiteman – Updated May 3, 2019 at 10:48AM

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Better-than-expected results provided evidence that the company's restructuring plan is working.

What happened

Shares of Flowserve (FLS -3.47%) jumped more than 8% on Friday after the fluid motion and control products maker reported first-quarter earnings that came in ahead of expectations thanks to improving margins.

So what

Flowserve posted first-quarter adjusted earnings of $0.41 per share, beating the $0.34-per-share analyst consensus, despite revenue coming in at $890.1 million, well shy of the $944 million analysts had expected. Sales were down 3.3% year over year, or up 0.4% on a constant currency basis, and included a 1% negative impact from a divestiture.

Yellow piping snaking through an industrial site.

Image source: Getty Images.

The results suggest that Flowserve is doing a good job of extracting costs from its operations. The company reported gross and operating margins of 33% and 10.2% in the quarter, up 350 and 530 basis points year over year, respectively.

Total bookings in the quarter were $1.07 billion, up 14.9%, giving the company a total backlog as of March 31 of $2.1 billion, which was up 9.2% over year-end.

Now what

Its shares had a difficult run late in 2018 as concerns over a global slowdown cutting into international industrial growth weighed on investors. Flowserve reaffirmed its full-year 2019 earnings outlook, though, for $1.95 to $2.15 per share, and said it expects revenue to increase 4% to 6% year over year.

The real takeaway for investors is that the company's push to transform itself by cutting costs, realigning operations, and focusing on what are expected to be higher-growth products seems to be having the desired effect.

Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Flowserve Corporation Stock Quote
Flowserve Corporation
FLS
$24.74 (-3.47%) $0.89

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