Analysts’ recommendations for Flowserve
Flowserve (FLS) has a Wall Street analyst consensus rating of “hold.” Of the 21 analysts surveyed by Bloomberg, three gave the company “buy” ratings, 15 gave it “hold” ratings, and three gave it “sell” ratings. Analysts have given FLS a price target of $46.27, 3.0% below its July 6, 2016, closing price of $44.87.
Flowserve’s recent ratings
Nomura (NMR) gave a “reduce” rating and a price target of $38 to FLS’s stock on April 4, 2016. This price target implies a 15.3% potential downside compared to July 6, 2016.
RBC Capital Markets (RBC) gave an “underperform” rating and a price target of $35 to FLS on February 21, 2016. This price target implies a 21.9% potential downside over its July 6 close.
Stifel (SF) gave FLS a “buy” rating and a price target of $51 on April 3, 2016, the highest among analysts. This implies a 13.6% potential price rise compared to July 6.
What do these recommendations mean?
The majority of Wall Street analysts have “hold” ratings on Flowserve. This shows that the analyst community still wants to wait and watch.
FLS is undergoing a $350 million restructuring program between 2015 and 2017. This is a cost reduction move. FLS also wants to shift its manufacturing facilities to low-cost destinations.
FLS is making efforts, but crude oil’s weakness continues to affect overall demand. FLS’s orderbook was down 19% in 2015. The company’s organic sales growth has also been affected.
For 2016, FLS has projected a 7%–14% fall in sales and a 19% fall in earnings. FLS’s 2Q16 targets are suppressed compared to those of its peers. This could be alarming for the short term.
FLS’s stock price has corrected by 17.8% since July 2015. The Industrial Select Sector SPDR ETF (XLI) has risen by 3.9% during the same period.
Will FLS maintain its full-year guidance as discussed above or further reduce it? To find out, we’ll need to wait for its 2Q16 quarterly results, which will be released on July 29, 2016.