Flowserve (FLS) To Report Q3 Earnings: What's In The Offing?

Flowserve Corporation (NYSE:FLS) is scheduled to release third-quarter 2019 results on Oct 30, after market close.

The company delivered better-than-expected results thrice in the last four quarters and met estimates in one, the average positive earnings surprise being 10.79%. The company’s second-quarter earnings of 54 cents per share surpassed the Zacks Consensus Estimate of 51 cents by 5.88%.

In the past three months, the company’s shares have lost 3.7% against industry’s growth of 2%.

Factors to Consider

Flowserve is likely to have gained from strength in its end markets in the third quarter. In the oil and gas industry, rise in maintenance, repair & operation spending across the globe on account of increased focus on maintenance and efficiency, higher demand for cleaner fuels, and pickup in liquefied natural gas-related activities in North America are likely to have benefited it. Also, strong demand, which has spurred investments in ethylene and derivative facilities, might have aided the company in gaining from the chemical market. In addition, strength in thermal solar market is likely to have boosted Flowserve’s top-line performance in the to-be reported quarter.

Also, favorable business conditions, particularly in North America and the Middle East are expected to have strengthened its sales. In addition, the company is undergoing a transformational realignment program to optimize its manufacturing platform and reduce costs. Notably, its focus on improving on-time delivery, reducing backlog, enhancing sales process and further leveraging on the supplier relationships might get reflected in its upcoming results.

Notably, the Zacks Consensus Estimate for third-quarter revenues from the company’s Flow Control Division segment is currently pegged at $322 million, indicating an increase of 5.2% from the year-ago reported figure.

However, challenging conditions in the power market might have adversely impacted bookings in the third quarter. Also, increasing liabilities are likely to have posed a concern for Flowserve. Notably, at the end of second-quarter 2019, the company’s long-term debt was $1,386.5 million and interest expenses incurred in the first half of 2019 was $28 million. The company’s profitability is expected to have been adversely impacted by high-debt levels in the to-be-reported quarter as well.

Earnings Whispers

According to our quantitative model a stock needs to have the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy), or at least 3 (Hold) to increase the odds of an earnings beat.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

But that is not the case here as we will see below.

Earnings ESP: Flowserve has an Earnings ESP of -3.60% as the Most Accurate Estimate is pegged at 54 cents, lower than the Zacks Consensus Estimate of 56 cents.

Zacks Rank: Flowserve carries a Zacks Rank #3.

Key Picks

Here are some companies you may want to consider as our model shows that these have the right mix of elements to beat estimates this earnings season:

Plug Power, Inc. (NASDAQ:PLUG) has an Earnings ESP of +58.33% and a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Welbilt, Inc. (NYSE:WBT) has an Earnings ESP of +1.01% and a Zacks Rank of 3.

Sealed Air Corporation (NYSE:SEE) has an Earnings ESP of +2.40% and a Zacks Rank #3.

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