Flowserve (FLS) Q3 2024 earnings summary

Executive summary

• Q3 2024 bookings reached $1.2B, up 12.7% year-over-year, with sales of $1.13B (+3.5%), record backlog of $2.8B, and strong aftermarket and 3D strategy contributions.

• Adjusted EPS rose 24% to $0.62, reported EPS was $0.44, and cash from operations surged 121% to $178M, reflecting operational improvements.

• MOGAS Industries acquisition completed, expected to add $200M in annual revenue, deliver $15M in cost synergies by year two, and be EBITDA margin accretive.

• Reaffirmed full-year adjusted EPS guidance of $2.60–$2.75, with Q4 expected near the midpoint due to less POC revenue and absence of Jafurah 1 ramp.

• Backlog at quarter-end was $2.8B, up 3.3% from year-end, with book-to-bill ratio above 1.06.

Financial highlights

• Adjusted gross margin increased 270 bps to 32.4%; reported gross margin was 31.5% (+250 bps); adjusted operating margin expanded 240 bps to 11.1%.

• FPD segment gross margin up 410 bps to 33.7%; FCD segment gross margin up 10 bps to 29.9%.

• Net earnings attributable to Flowserve were $58.4M (+26.5%); Q3 operating income was $103.2M (9.1% margin).

• Free cash flow to adjusted net earnings was 189% for the quarter; cash from operations for nine months was $228M.

• Book-to-bill: FPD 1.13x, FCD 0.90x; inventory turns at 3.5x, DSO at 77 days.

Outlook and guidance

• Reaffirmed 2024 adjusted EPS guidance of $2.60–$2.75; revenue growth expected between 4.0% and 6.0% for the full year.

• Adjusted operating margin guidance for 2024 at 11.5%+, targeting 14–16% by 2027.

• MOGAS acquisition excluded from 2024 guidance; will be included in 2025 outlook.

• Capital expenditures for 2024 estimated at $75–$85M, excluding acquisitions.

• Annualized cost savings in excess of $100M expected from realignment programs.