A month has gone by since the last earnings report for Flowserve (FLS Quick QuoteFLS - Free Report) . Shares have added about 4.3% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Flowserve due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Flowserve Q1 Earnings & Revenues Top Estimates, Rise Y/Y

Flowserve’s first-quarter 2024 adjusted earnings (excluding 2 cents from non-recurring items) of 58 cents per share beat the Zacks Consensus Estimate of 47 cents. The bottom line increased 45% year over year. Results primarily benefited from higher revenues, partially offset by an increase in operating costs and expenses.

Flowserve’s total sales of $1.09 billion beat the consensus estimate of $1.04 billion. The top line increased 10.9% year over year. Sales increased 10.6% on a constant-currency basis.

Aftermarket sales in the reported quarter increased 8.1% year over year (up 8.1% on a constant-currency basis) to $558.9 million. Original equipment sales totaled $528.6 million, reflecting an increase of 14.1% year over year (up 13.5% on a constant-currency basis).

Total bookings amounted to $1.04 billion in the quarter, reflecting a decrease of 1.8% (down 1.8% on a constant-currency basis) year over year. The backlog at the end of the reported quarter was $2.6 billion, down 6.9% year over year.

Segmental Details

FLS currently has two reportable segments, Flowserve Pump Division and Flow Control Division. A brief discussion of the segments is provided below:

Revenues from the Flowserve Pump Division segment were $769.4 million, up 9.9% year over year. Bookings decreased 3.4% year over year to $703.5 million. Segmental operating income was $110.9 million, up 40.2% year over year.

Revenues from the Flow Control Division segment were $320.5 million, up 13.8% year over year. Bookings of $341.1 million increased 2.7% on a year over year basis. The segment’s operating income was $34.7 million, up 87.6% year over year. Our estimate for the same was $32 million.

Margin Profile

In the first quarter, Flowserve’s cost of sales increased 9.5% year over year to $748.5 million. Gross profit increased 14.2% year over year to $339 million and the margin increased 90 basis points (bps) to 31.2%. Selling, general and administrative expenses were $228.4 million, down 6.5% year over year.

Operating income in the quarter increased 97.7% year over year to $113.1 million. The adjusted operating margin came in at 10.9%, up 260 bps year over year. The effective tax rate was 20.4% in the quarter.

Balance Sheet and Cash Flow

Exiting the first quarter, Flowserve had cash and cash equivalents of $532 million compared with $545.7 million at the end of December 2023. Long-term debt (due after one year) was $1.15 billion compared with $1.17 billion at the end of December 2023.

In first three months of 2024, the company generated net cash of $62.3 million from operating activities compared with $26.6 million in the year-ago period. Capital expenditure in the year totaled $13.6 million, down 11.1% year over year.

During the same period, the company used $27.7 million for distributing dividends.

2024 Guidance

Flowserve continues to expect a 4-6% increase in revenues from the year-ago levels. The company anticipates earnings per share (on a reported basis) to be between $2.25 and $2.45. Adjusted earnings per share are now estimated in the $2.50-$2.70 band, higher than $2.40-$2.60 projected earlier.

The adjusted tax rate is projected to be approximately 20%. The company forecasts net interest expense and capital expenditure to be $60-$65 million and $75-$85 million, respectively.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review.

VGM Scores

Currently, Flowserve has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Flowserve has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.

Performance of an Industry Player

Flowserve is part of the Zacks Manufacturing - General Industrial industry. Over the past month, Dover Corporation (DOV Quick QuoteDOV - Free Report) , a stock from the same industry, has gained 2.3%. The company reported its results for the quarter ended March 2024 more than a month ago.

Dover reported revenues of $2.09 billion in the last reported quarter, representing a year-over-year change of +0.7%. EPS of $1.95 for the same period compares with $1.94 a year ago.

For the current quarter, Dover is expected to post earnings of $2.22 per share, indicating a change of +8.3% from the year-ago quarter. The Zacks Consensus Estimate remained unchanged over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Dover. Also, the stock has a VGM Score of C.