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How Has Flowserve Stock Fared ahead of Its 1Q16 Earnings?

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Apr. 14 2016, Published 3:57 p.m. ET

Flowserve’s stock performance

Flowserve (FLS) stock has been on a downward trend since March 2015. On a yearly basis, FLS has corrected approximately 20% to date. This is because its financial performance has been largely impacted by weak macro environmental issues, the strengthening of the US dollar, and volatility in the oil and gas sector.

FLS has risen 5.4% since January 2016 compared to a ~6.7% rise in the Industrial Select Sector SPDR ETF (XLI) for the same period.

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Flowserve’s peer performance

FLS’s management indicated that the Market downturn is more severe and of longer duration than anticipated. Industrial (XLI) stocks have been performing well due to hopes of global growth and the hope that earnings in the second half of 2016 will be better than the first half.

Year-to-date, shares of Emcor Group (EME), Graco (GGG), and Xylem (XYL) have performed well. They’ve generated returns of 5%, 18%, and 16%, respectively, so far in 2016.

About Flowserve

Flowserve designs, manufactures, distributes, and services industrial flow management equipment throughout the world. It provides pumps, valves, and mechanical seals. It serves the refinery and pipeline segments of the petroleum, chemical, processing, power generation, and water treatment industries.

Flowserve broadly operates in three segments: engineered products, industrial products, and flow control. Its engineered, industrial, and flow control businesses contributed approximately 49%, 21%, and 30%, respectively, to its consolidated revenue in fiscal 2015.

The long-term fundamental growth outlook provided by FLS’s management is positive. But management has also affirmed that the near-term Market downside could be severe and longer than expected. What is FLS’s guidance for fiscal 2016? In the next part, we’ll look at Flowserve’s outlook for fiscal 2016.

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