5 Insightful Analyst Questions From Flowserve's Q3 Earnings Call

Flowserve’s third quarter results drew a positive response from the market, reflecting progress in margin expansion and continued growth in key business areas. Management pointed to robust aftermarket bookings and notable advances in the power and nuclear segments as major contributors. CEO Robert Rowe credited the “Flowserve Business System” and the company’s 80/20 complexity reduction program for driving higher adjusted gross margins despite ongoing project timing challenges in the energy sector. The quarter also saw increased cash generation, which enabled additional share repurchases and a strengthened balance sheet.

Is now the time to buy FLS? Find out in our full research report (it’s free for active Edge members).

While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.

Our Top 5 Analyst Questions From Flowserve’s Q3 Earnings Call

• Michael Halloran (Baird) asked about the sustainability of order trends and the project pipeline; CEO Robert Rowe emphasized the resilience of aftermarket bookings and a deliberate shift away from large engineered projects to reduce cyclicality.
• Andrew Kaplowitz (Citigroup) inquired about margin improvements in the Flow Control Division and the impact of the Mogas acquisition; Rowe highlighted successful integration and operational upgrades, while CFO Amy Schwetz noted ongoing margin expansion across all segments.
• Damian Karas (UBS) questioned the profitability of nuclear project awards amid industry competition; Rowe explained high barriers to entry and multiyear engineering cycles, while Schwetz stressed investments in nuclear expertise to maintain margins.
• Brett Linzey (Mizuho Securities) sought clarity on energy bookings declines and outlook; Rowe attributed the drop to difficult comparisons and Middle East project timing, expressing confidence in recovery as delayed projects move forward.
• Nathan Jones (Stifel) asked about Flowserve’s expected market share in the $10 billion nuclear opportunity; Rowe stated the company currently has content in 75% of global reactors and aims to maintain or grow this share, particularly outside China.

Catalysts in Upcoming Quarters

Looking to future quarters, our team will closely watch (1) the pace of nuclear project bookings and Flowserve’s ability to capture new reactor and life extension work, (2) sustained strength and profitability in the aftermarket business, and (3) margin progression as operational excellence programs mature and synergies from recent acquisitions, such as Mogas, are realized. Execution on capital allocation and backlog conversion will also be important indicators.

Flowserve currently trades at $72, up from $52.65 just before the earnings. At this price, is it a buy or sell? Find out in our full research report (it’s free for active Edge members).

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