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What Do Analysts Recommend for Flowserve after Its 2Q16 Results?

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Aug. 10 2016, Updated 10:04 a.m. ET

Analysts’ recommendations for Flowserve

Flowserve (FLS) has a Wall Street analyst consensus rating of “hold.” Of the 20 analysts surveyed by Bloomberg, three gave the company “buy” ratings, 15 gave it “hold” ratings, and two gave it “sell” ratings.

Analysts have given FLS a price target of $45.93, which is 0.1% below its August 1, 2016, closing price of $45.96.

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Flowserve’s recent ratings

Goldman Sachs (GS) gave a “sell-neutral” rating and a price target of $38 to FLS’s stock on July 29. This price target implies a 17.3% potential downside over August 1’s close.

RBC Capital Markets (RBC) gave an “underperformer” rating with a price target of $40 to FLS’s stock on July 31. This price target implies a 12.7% potential downside over August 1’s close.

Stifel (SF) also gave FLS a “buy” rating with the highest price target of $54 on May 1. This implies a 17.5% potential price rise over August 1’s close.

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. Global uncertainty is affecting FLS’s orderbook and revenue to a great extent.

FLS is undergoing a $350 million restructuring program between 2015 and 2017. This is a cost reduction move. The company is also shifting its manufacturing facilities to low-cost destinations.

FLS is making efforts, but the weakness in crude prices continues to affect overall demand. FLS’s orderbook was down by 21.4% in 2Q16 compared 2Q15. The company’s organic sales growth has also been affected.

Prior to FLS’s 2Q16 results, there were concerns about whether it could increase its order intake and revenue. However, aftermarket stability and expected order intake stability in FLS’s end markets should be sustainable in the coming quarters.

For 2016, FLS has projected a 7%–14% fall in its sales and a 19% fall in its earnings. FLS’s targets are suppressed compared to its peers’. FLS will benefit from the recovery of the oil and gas, chemical, general industrials, and power sectors.

FLS’s stock price fell by 1.6% from August 1, 2015, to August 1, 2016. The Industrial Select Sector SPDR ETF (XLI) rose by 6.9% in the same period.

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