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Behind Flowserve’s Surge despite Weak 1Q16 Earnings

Flowserve Surged Anyway: Reinterpreting FLS's 1Q16 Earnings

Market reaction to Flowserve’s 1Q16 laggard earnings

Flowserve Corporation (FLS) announced its 1Q16 results on April 29, 2016, before the market opened. Better-than-expected 1Q16 revenues initially sent FLS’s shares to a high of $49.52 in early trading. The stock closed at $48.81, 2.9% higher than its opening price of $47.42.

As of April 29, 2016, FLS has declined by 13.8% YoY (year-over-year) as compared to the 2.1% decrease seen in the broad-based S&P 500 Index (SPY). YTD (year-to-date) as of April 29, 2016, FLS has risen by 17.9%.

Flowserve’s EPS beats markets

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On a quarterly basis, FLS’s adjusted EPS (earnings per share) stood at $0.39, 7.1% below the consensus of $0.42 per share, as of April 29. For 1Q15, the company’s EPS came in at $0.58. In 1Q16, its adjusted EPS experienced an unfavorable seasonal impact and an increase in SG&A (selling, general, and administrative) expenses.

But SG&A in 1Q15 included $6.3 million in realignment charges and $1.3 million in price purchase agreements and integration expenses. In 1Q16, SG&A expenses as a percentage of sales stood at 24%, just over the 22% it saw in 1Q15. Management expects the company’s SG&A expenses to be below 24% going forward.

FLS’s peers include Cameron International (CAM), Emerson Electric (EMR), and Pentair (PNR). CAM’s 1Q16 expected EPS stands at $0.56 per share, which represents a fall of 37.8% over $0.91 in 1Q15. EMR’s 1Q16 EPS stood at $0.56 per share, which is 25.3% lower than its $0.75 in 1Q15. PNR’s 1Q16 EPS stood at $0.76 per share—16.9% higher than its $0.65 in 1Q15.

Read on to know more about Flowserve’s 1Q16 revenues.

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