Flowserve Shares Plunge Sharply Due to Earnings Miss and Weak Outlook

DALLAS - Shares of Flowserve Corporation (NYSE:FLS), a provider of flow control products, fell 11% following the company's third-quarter earnings that missed analyst expectations and a disappointing full-year forecast. The company reported an adjusted earnings per share of $0.62, below the consensus estimate of $0.67. Revenue rose 3.5% year-over-year, reaching $1.13 billion, in line with analyst projections.

Flowserve reaffirmed its adjusted earnings per share guidance for the full year 2024 to be in the range of $2.60 to $2.75, which is below the Wall Street consensus of $2.76. While the company highlighted operational improvements, investors seemed focused on the earnings miss and the weak outlook.

Flowserve's President and CEO Scott Rowe stated, "Our third-quarter results reflect strong operational performance and include significant year-over-year improvements in margins, earnings per share, and cash flow." However, he also noted that the results included a $0.07 per share charge related to certain long-term obligations.

Total orders increased by 12.7% year-over-year to $1.20 billion. Original equipment orders rose by 21.4%, and aftermarket orders increased by 5.6%. The company's backlog grew by 3.7% compared to the previous quarter, reaching $2.8 billion.

Flowserve maintained its full-year revenue growth forecast at 4% to 6%, which does not account for the impact of its recently completed acquisition of MOGAS Industries.

Despite the earnings miss, Flowserve emphasized margin expansion. Adjusted gross margin increased by 270 basis points year-over-year to 32.4%, and adjusted operating margin rose by 240 basis points to 11.1%.

The significant drop in the stock suggests that investors are disappointed with Flowserve's results and outlook, overshadowing the company's progress in margins and order growth.