Yahoo Finance Flowserve Corp (FLS) Q1 2024 Earnings Call Transcript Highlights: Strong Performance and ...
Adjusted EPS Guidance: Increased to $2.50 - $2.70, nearly 24% increase YoY
Adjusted Earnings Per Share (Q1): $0.58, up 45% from Q1 2023
Revenue (Q1): $1.1 billion, up nearly 11% YoY
Adjusted Gross Margin: 31.7%, exceeded expectations
Adjusted Operating Income Margin: 10.9%, up 260 basis points YoY
Bookings (Q1): $1.04 billion, with aftermarket bookings over $575 million
Operating Cash Flow (Q1): Record $62 million
Free Cash Flow (Q1): Record $49 million
Release Date: April 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Q & A Highlights
Q: Can you discuss the composition of the orders and what it indicates about the pipeline of demand? A: (Robert Scott Rowe - President, CEO & Director) In Q1, the largest project award was $12 million, with several smaller ones in the $5 million to $10 million range. The company has implemented a selective bidding framework to ensure projects can be won, executed, and deliver expected margins and aftermarket entitlement. This approach has led to solid growth, with the project funnel up 10% year-over-year, showing good visibility across global projects.
Q: What improvements in working capital can be expected, and how quickly? A: (Amy B. Schwetz - Senior VP & CFO) Flowserve is focused on reaching the target of 25% to 27% working capital as a percentage of sales early, with ongoing efforts in operational excellence to increase inventory velocity and improve planning capabilities. Selectivity in large projects also considers the cash profile, contributing to working capital improvements.
Q: How should we think about revenue and margin progression over the next few quarters, especially with less seasonality expected this year? A: (Amy B. Schwetz - Senior VP & CFO) The company expects less variation in revenue between Q1 and Q2, with Q4 being less of a volume story than in previous years. Margin expansion is anticipated in the second half of the year, providing a sustainable exit rate that supports margin expansion in 2025.
Q: Can you elaborate on the sustainability of the Middle East market strength and geographic performance? A: (Robert Scott Rowe - President, CEO & Director) The Middle East remains a significant opportunity, with substantial infrastructure build-out expected. Flowserve sees stable conditions in key countries like Saudi, UAE, Qatar, and Oman. The company is also observing positive signals in Europe and continued strength in the Americas, supporting a positive outlook for the flow control space.
Q: How does the resurgence in power markets manifest in Flowserve's portfolio, and what gaps might need addressing? A: (Robert Scott Rowe - President, CEO & Director) Flowserve has a strong presence in all forms of power generation, including traditional, nuclear, and renewable energy. The company is making minor adjustments to its portfolio to stay relevant in emerging markets like hydrogen. The existing relationships and channels provide a strong foundation for growth in this sector.
Q: What is the expected impact of large OE projects on margins, and how does Flowserve plan to manage this? A: (Amy B. Schwetz - Senior VP & CFO) The focus is on growing the OE business at expanded margins while balancing growth with aftermarket components. As long as the growth between OE and aftermarket remains balanced and operational excellence continues, Flowserve expects to expand margins while securing profitable project work.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
