Tags: Flowserve | upswing | recession | FLS

Flowserve On Sustained Upswing Out of Recession

By    |   Friday, 03 Feb 2012 06:25 AM

Flowserve (FLS) provides products necessary for the infrastructure of industries such as oil and gas and chemical manufacturing. Recent results indicated the company may be on a sustained upswing coming out of the recent recession.

Flowserve produces what it calls "fluid motion and control products." The company makes and sells engineered pumps, valves and seals. Additional revenue is generated by servicing the products and sales of replacement parts.

Approximately 40 percent of orders are from the oil and gas industry, 20 percent from chemical companies and the balance from the power, water and general industries sectors. One-third of Flowserve's revenue comes from North America and one-quarter from the Middle East and Africa. About 60 percent of sales is for new equipment and the balance is from the purchase of replacement parts and service.

For the first nine months of 2011, sales were up 12 percent to $3.24 billion. New order bookings were up 10 percent, pointing to a continued growth of revenue. Currency gains were responsible or about 5 percent of the revenue increase.

Net income for the three quarters was $5.40 per share, up 10 percent. The consensus estimate for full year 2011 earnings is $7.67 per share, up from $6.88 in 2010.

Flowserve management has provided 2012 earnings guidance of between $8 and $8.80 per share, a number which includes 50 cents of negative effects due to a strong U.S. dollar.

From a recession low of $4.03 billion of revenue in 2010, the company is projected to hit $4.5 billion of sales in 2011 and $4.8 billion in 2012. Management credits strength in oil and gas and the chemical industries, which is offsetting weakness in orders from the power sector.

Buybacks


Flowserve recently established a policy to return 40 to 50 percent of net earnings back to shareholders in the form of dividends and share repurchase authorizations. The board of directors has been increasing the dividend by about 10 percent each year for the past several years.

The analysts at Standard & Poor's have a strong buy rating on Flowserve and their target price is about 20 percent above the current share value.

The company next reports on Feb. 22.

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2012-25-03
Friday, 03 Feb 2012 06:25 AM
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