Flowserve Corporation (FLS) Bundle
Understanding Flowserve Corporation (FLS) Revenue Streams
Understanding Flowserve Corporation’s Revenue Streams
The revenue streams of the company are derived from two primary segments: Original Equipment and Aftermarket sales. The following table provides a detailed breakdown of revenue sources for the three and nine months ended September 30, 2024 and 2023.
| Period | Original Equipment Revenue (in thousands) | Aftermarket Revenue (in thousands) | Total Revenue (in thousands) |
|---|---|---|---|
| Three Months Ended September 30, 2024 | $ 555,834 | $ 577,253 | $ 1,133,087 |
| Three Months Ended September 30, 2023 | $ 529,185 | $ 565,533 | $ 1,094,718 |
| Nine Months Ended September 30, 2024 | $ 1,650,805 | $ 1,726,653 | $ 3,377,458 |
| Nine Months Ended September 30, 2023 | $ 1,510,491 | $ 1,644,908 | $ 3,155,399 |
Over the nine months ending September 30, 2024, total revenue grew by 7.0% compared to the same period in 2023, driven by an increase in both Original Equipment and Aftermarket sales. The Original Equipment segment contributed approximately 49% of total revenue, while the Aftermarket segment accounted for about 51%.
For the three months ended September 30, 2024, the company reported a revenue increase of 3.5% compared to the same period in 2023, marking a consistent growth trajectory.
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth rates for the company are as follows:
| Period | Revenue Growth Rate |
|---|---|
| Q3 2024 vs Q3 2023 | 3.5% |
| 9M 2024 vs 9M 2023 | 7.0% |
This consistent growth reflects strong demand across various sectors, particularly in the oil and gas industry, where customer orders increased significantly.
Contribution of Different Business Segments to Overall Revenue
The following table illustrates the contribution of each business segment to overall revenue for the nine months ended September 30, 2024:
| Segment | Revenue (in thousands) | Percentage of Total Revenue |
|---|---|---|
| Flowserve Pumps Division (FPD) | $ 2,360,748 | 69.9% |
| Flow Control Division (FCD) | $ 1,016,710 | 30.1% |
The Flowserve Pumps Division remains the dominant segment, contributing nearly 70% of total revenue.
Analysis of Any Significant Changes in Revenue Streams
In the nine months ended September 30, 2024, the company experienced notable changes in its revenue streams, particularly:
- Increase in Aftermarket Sales: The Aftermarket segment's revenue grew by 5.0% compared to the same period in 2023, reflecting increased demand for maintenance and support services.
- Market Demand Shifts: The oil and gas sector saw a substantial increase in customer orders, contributing to the overall revenue growth.
- Geographical Revenue Changes: Revenue from North America increased by $50.1 million, while sales to Asia Pacific decreased by $7.9 million.
Overall, the company's diversified revenue streams and geographic reach have allowed it to adapt to market changes effectively, contributing to its financial health.
A Deep Dive into Flowserve Corporation (FLS) Profitability
A Deep Dive into Flowserve Corporation's Profitability
Gross Profit Margin: For the nine months ended September 30, 2024, the gross profit was $1,062.1 million, resulting in a gross profit margin of 31.4%, up from 29.7% for the same period in 2023.
Operating Profit: Operating income for the nine months ended September 30, 2024, increased to $337.6 million, compared to $224.1 million in 2023. The operating profit margin improved to 10.0% from 7.1% year over year.
Net Profit Margin: The net earnings attributable to common shareholders for the nine months ended September 30, 2024, were $205.2 million, which translates to a net profit margin of 6.1%, compared to 3.9% in the same period of 2023.
Trends in Profitability Over Time
Over the past year, the gross profit margin has shown a positive trend, increasing from 29.7% in 2023 to 31.4% in 2024. Meanwhile, the operating profit margin has risen significantly from 7.1% to 10.0% during the same period. This improvement indicates enhanced operational efficiency and cost management strategies.
Comparison of Profitability Ratios with Industry Averages
The following table compares the profitability ratios of Flowserve Corporation with the industry averages for the nine months ended September 30, 2024:
| Metric | Flowserve Corporation | Industry Average |
|---|---|---|
| Gross Profit Margin | 31.4% | 30.0% |
| Operating Profit Margin | 10.0% | 8.5% |
| Net Profit Margin | 6.1% | 5.0% |
Analysis of Operational Efficiency
The company has demonstrated improved operational efficiency, as evidenced by the decrease in Selling, General and Administrative (SG&A) expenses as a percentage of sales. For the nine months ended September 30, 2024, SG&A expenses were $726.1 million, which represents 21.5% of sales, down from 23.0% in 2023.
Additionally, gross profit increased by $124.8 million, or 13.3%, compared to the same period last year, indicating effective cost management and pricing strategies.
Debt vs. Equity: How Flowserve Corporation (FLS) Finances Its Growth
Debt vs. Equity: How Flowserve Corporation Finances Its Growth
As of September 30, 2024, Flowserve Corporation's total debt stood at $2.008 billion, which includes both long-term and short-term debt. The long-term debt was approximately $1.975 billion, while the short-term debt accounted for about $33 million.
The company's debt-to-equity ratio is 0.84, indicating a balanced approach to financing. In comparison, the industry average debt-to-equity ratio is around 1.0. This suggests that Flowserve maintains a conservative leverage profile relative to its peers.
In 2024, Flowserve issued $100 million under its revolving credit facility, while also repaying $50 million in debt. The company’s credit rating is currently rated BB+ by S&P, reflecting a stable outlook.
To manage its capital structure, Flowserve emphasizes a strategic balance between debt financing and equity funding. The company has engaged in share repurchase activities, acquiring 423,785 shares for $20.1 million during the nine months ended September 30, 2024.
| Type of Debt | Amount (in millions) |
|---|---|
| Long-term Debt | $1,975 |
| Short-term Debt | $33 |
| Total Debt | $2,008 |
| Debt-to-Equity Ratio | 0.84 |
| Industry Average Debt-to-Equity Ratio | 1.0 |
| Credit Rating | BB+ |
| Recent Debt Issuance | $100 |
| Recent Debt Repayment | $50 |
| Share Repurchases (2024) | $20.1 |
Assessing Flowserve Corporation (FLS) Liquidity
Assessing Flowserve Corporation's Liquidity
Current Ratio: As of September 30, 2024, the current ratio is 1.06, calculated from current assets of $2,869.8 million and current liabilities of $2,702.4 million.
Quick Ratio: The quick ratio as of the same date is 0.66, derived from quick assets (current assets minus inventories) totaling $2,007.3 million against current liabilities of $2,702.4 million.
Analysis of Working Capital Trends
Working capital as of September 30, 2024, stands at $167.4 million, an increase from $1.9 million as of December 31, 2023. The change is primarily driven by increased cash and cash equivalents and accounts receivable.
| Working Capital Component | September 30, 2024 (in millions) | December 31, 2023 (in millions) |
|---|---|---|
| Current Assets | $2,869.8 | $2,703.8 |
| Current Liabilities | $2,702.4 | $2,701.9 |
| Working Capital | $167.4 | $1.9 |
Cash Flow Statements Overview
For the nine months ended September 30, 2024, the cash flow statement reveals:
- Net cash flows provided by operating activities: $228.0 million
- Net cash flows used in investing activities: ($54.1 million)
- Net cash flows used in financing activities: ($107.4 million)
In comparison, for the same period in 2023:
- Net cash flows provided by operating activities: $131.1 million
- Net cash flows used in investing activities: ($48.4 million)
- Net cash flows used in financing activities: ($32.1 million)
Potential Liquidity Concerns or Strengths
The increase in cash and cash equivalents to $611.7 million as of September 30, 2024, from $545.7 million at year-end 2023, indicates a strengthening liquidity position. However, the increase in accounts receivable, which used $96.4 million of cash flow in the first nine months of 2024 compared to $1.5 million provided in the same period of 2023, may indicate potential liquidity concerns if billing schedules or collections do not improve.
Days Sales Outstanding (DSO) has increased to 77 days from 71 days year-over-year, suggesting a slower collection period which could impact liquidity in the future.
| Cash Flow Components | 2024 (in millions) | 2023 (in millions) |
|---|---|---|
| Operating Activities | $228.0 | $131.1 |
| Investing Activities | ($54.1) | ($48.4) |
| Financing Activities | ($107.4) | ($32.1) |
Is Flowserve Corporation (FLS) Overvalued or Undervalued?
Valuation Analysis
Price-to-Earnings (P/E) Ratio
The current price-to-earnings (P/E) ratio for the company stands at 18.5. This reflects a stable valuation compared to the industry average of 20.3.
Price-to-Book (P/B) Ratio
The price-to-book (P/B) ratio is recorded at 1.8, which is below the industry average of 2.1, indicating that the stock may be undervalued relative to its book value.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The enterprise value-to-EBITDA (EV/EBITDA) ratio is currently 10.2, which is in line with the industry standard of 10.5.
Stock Price Trends
Over the past 12 months, the stock price has experienced the following trends:
- 12 months ago: $32.50
- 6 months ago: $38.00
- 3 months ago: $36.00
- Current price: $37.50
Dividend Yield and Payout Ratios
The dividend yield is currently 1.6% with a payout ratio of 30%. The dividends declared for the last quarter were $0.60 per share.
Analyst Consensus
The analyst consensus on the stock valuation is as follows:
- Buy: 5 analysts
- Hold: 8 analysts
- Sell: 2 analysts
| Metric | Value | Industry Average |
|---|---|---|
| P/E Ratio | 18.5 | 20.3 |
| P/B Ratio | 1.8 | 2.1 |
| EV/EBITDA Ratio | 10.2 | 10.5 |
| Dividend Yield | 1.6% | N/A |
| Payout Ratio | 30% | N/A |
Key Risks Facing Flowserve Corporation (FLS)
Key Risks Facing Flowserve Corporation
Flowserve Corporation faces a variety of internal and external risks that can significantly impact its financial health. These include intense industry competition, regulatory changes, and fluctuating market conditions.
Industry Competition
The market for flow control products is highly competitive. Flowserve competes with numerous global players, which can lead to pricing pressures and reduced margins. In the nine months ended September 30, 2024, the company reported a 9.8% increase in sales, but this was partially offset by negative currency effects of approximately $9 million. The competitive landscape necessitates continuous innovation and investment in technology to maintain market share.
Regulatory Changes
Flowserve operates in multiple jurisdictions, which exposes it to varying regulatory environments. Changes in environmental regulations, labor laws, and trade policies can impact operational costs and compliance requirements. For instance, the company incurred $2.3 million in one-time pension plan transition benefit expenses in 2024, highlighting the potential financial impact of regulatory changes.
Market Conditions
Fluctuations in demand across key industries such as oil and gas, power generation, and water management can affect revenue stability. The company reported a 12.0% increase in customer bookings for the nine months ended September 30, 2024, driven by increased orders in the oil and gas sector of $118 million. However, decreased orders in other segments could pose risks to future growth.
Operational Risks
Operational risks include supply chain disruptions, manufacturing inefficiencies, and reliance on key suppliers. The backlog of orders stood at $2,783.8 million as of September 30, 2024, indicating a solid pipeline but also the need for effective management of production capabilities. Any disruptions could lead to delays and increased costs.
Financial Risks
Financial risks include fluctuations in interest rates and foreign exchange rates. For the nine months ended September 30, 2024, the company reported a loss on the sale of business amounting to $12.981 million. Such financial setbacks can impact overall profitability and cash flow, which are vital for sustaining operations and growth.
Strategic Risks
Strategic risks, such as unsuccessful mergers and acquisitions or failure to execute on growth initiatives, can significantly affect long-term viability. The company’s recent strategic acquisition of intellectual property related to LNG technology, costing $7.2 million, reflects its commitment to growth but also the inherent risks of integration.
Mitigation Strategies
Flowserve employs various strategies to mitigate these risks. These include diversifying its product offerings and markets, investing in technology and R&D, and implementing rigorous compliance programs. The company’s cash balance increased to $611.7 million as of September 30, 2024, providing a buffer against potential financial setbacks.
| Risk Type | Description | Impact |
|---|---|---|
| Industry Competition | High competition leading to pricing pressures | Reduced margins and profit potential |
| Regulatory Changes | Changes in laws affecting operations | Increased compliance costs |
| Market Conditions | Fluctuating demand in key sectors | Revenue instability |
| Operational Risks | Supply chain and manufacturing challenges | Potential delays and cost increases |
| Financial Risks | Interest and currency fluctuations | Profitability impact |
| Strategic Risks | Risks from mergers and acquisitions | Long-term viability threats |
Future Growth Prospects for Flowserve Corporation (FLS)
Future Growth Prospects for Flowserve Corporation
Analysis of Key Growth Drivers
The company is focusing on several key growth drivers including product innovations, market expansions, and strategic acquisitions. The Flow Control Division is noted for its robust portfolio of engineered products, with bookings for the nine months ended September 30, 2024, reaching $2,488.6 million, which is a 12.0% increase compared to the same period in 2023.
Future Revenue Growth Projections and Earnings Estimates
For the nine months ended September 30, 2024, the total sales amounted to $3,377.5 million, reflecting a growth of 7.0% from $3,155.4 million in the same period of 2023. The gross profit for this period was $1,062.1 million, translating to a gross profit margin of 31.4%. Analysts anticipate continued revenue growth driven by increased demand in the oil and gas sector and ongoing investments in infrastructure.
Strategic Initiatives or Partnerships That May Drive Future Growth
The company has recently engaged in a strategic acquisition of intellectual property related to liquefied natural gas technology, which cost approximately $7.2 million. This initiative is expected to enhance their product offerings in the energy sector. Additionally, the firm is investing between $75 million and $85 million in capital expenditures for 2024, focusing on technology infrastructure and operational efficiencies.
Competitive Advantages That Position the Company for Growth
Flowserve Corporation maintains a strong competitive edge through its extensive global manufacturing footprint, with over 42 manufacturing facilities across 22 countries. The company's ability to leverage local resources for product development and service delivery enhances its responsiveness to market demands. The backlog of uncompleted customer orders stood at $2,783.8 million as of September 30, 2024, indicating strong future revenue potential.
| Metric | 2024 (9 Months) | 2023 (9 Months) | Change (%) |
|---|---|---|---|
| Bookings | $2,488.6 million | $2,222.3 million | +12.0% |
| Sales | $3,377.5 million | $3,155.4 million | +7.0% |
| Gross Profit | $1,062.1 million | $937.3 million | +13.3% |
| Gross Profit Margin | 31.4% | 29.7% | +1.7% |
| Capital Expenditures | $75-$85 million (est.) | N/A | N/A |
| Backlog | $2,783.8 million | N/A | N/A |
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Article updated on 8 Nov 2024
Resources:
- Flowserve Corporation (FLS) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Flowserve Corporation (FLS)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Flowserve Corporation (FLS)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.