Here's Why Investors Should Retain Flowserve Stock in Portfolio

Flowserve Corporation FLS has been experiencing strong momentum in the Pump Division and Flow Control Division segments. Strength in the aftermarket business, driven by a strong demand for products and services in North America, Europe Middle East and Latin America, is a prime catalyst for the Flowserve Pumps Division segment’s growth (revenues up 1.8% year over year in the first quarter of 2025).

The segment’s bookings increased 21.2% year over year in the first quarter, with a book-to-bill ratio of above 1.0x. An increase in bookings across general industries, energy and power end markets is supporting the Flow Control Division segment’s performance (revenues up 13.6% year over year in the first quarter). The segment’s bookings increased 10.2% year over year in the first quarter. For 2025, Flowserve expects total revenues to increase in the range of 5-7% from the year-ago level.

FLS follows a balanced capital allocation strategy, wherein it utilizes its cash flow for acquisitions, paying out dividends and repurchasing shares. In October 2024, Flowserve completed the acquisition of MOGAS Industries. The MOGAS acquisition augmented the company’s existing valve and automation product portfolio and accelerated its 3D growth strategy by significantly boosting its direct mining and mineral extraction exposure. The company has been integrated into Flowserve’s Flow Control Division segment and improved its aftermarket potential and generated revenue growth synergies. In the first quarter of 2025, the buyout had a positive contribution of 3.3% to its sales growth.

Regarding shareholder returns, FLS used $27.6 million to distribute dividends and bought back shares worth $21.1 million in the first quarter of 2025. Also, Flowserve paid dividends of $110.4 million and bought back shares worth $20.1 million in 2024. In the first quarter, it hiked its quarterly dividend by approximately 5% to 21 cents per share.

Despite the positives, Flowserve has been dealing with rising operating costs and expenses over time. In the first quarter of 2025, the cost of sales increased 3.6% year over year to $775.2 million due to higher input costs. The metric, as a percentage of net sales, was 67.7%. Selling, general and administrative expenses also increased 6.5% in the same period.

Price Performance

Shares of this Zacks Rank #3 (Hold) company have lost 3% in the past year against the industry’s 4% growth.

High debt levels remain another concern for the company. Flowserve exited the first quarter of 2025 with a high long-term debt of $1.45 billion. Its interest expense was $19.2 million in the first quarter.

3 Promising Stocks

Some better-ranked stocks from the same space are discussed below.

Howmet Aerospace HWM currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

HWM delivered a trailing four-quarter average earnings surprise of 8.8%. In the past 60 days, the consensus estimate for Howmet’s 2025 earnings has increased 6.5%.

AptarGroup, Inc. ATR presently sports a Zacks Rank of 1. ATR delivered a trailing four-quarter average earnings surprise of 7.3%. In the past 60 days, the consensus estimate for AptarGroup’s 2025 earnings has increased 5.4%.

Federal Signal Corporation FSS currently carries a Zacks Rank #2 (Buy). FSS delivered a trailing four-quarter average earnings surprise of 6.4%. In the past 60 days, the Zacks Consensus Estimate for Federal Signal’s 2025 earnings has increased 1.6%.

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This article originally published on Zacks Investment Research (zacks.com).

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