Flowserve (FLS), maker of industrial pumps and fluid handling equipment, trounced earnings estimates by 64 cents. Sales grew 24% to $1.16 billion. The company reported huge demand in its project infrastructure unit, which serves the oil and gas, power, chemical, and water markets.
Management sees its 2008 earnings now in a range of $7.20 to $7.50 a share, up from its previous forecast of $5.90 to $6.20 a share. For dividend investors, the company’s .74% dividend yield (based on last night’s closing stock price of $135.0) is not super attractive, but the all-important PEG (Price to Earnings Growth) is less than 1. This low PEG number indicates great growth and a low valuation, making Flowserve a name to pick up on pullbacks…as long as management keeps this type of execution up.
The market continues to not reward these global growth companies for stellar earnings. As I wrote this AM, Flowserve (FLS) posted some fantastic earnings and a huge guide up on 2008 estimates [Flowserve Mighty Impressive Earnings]
After gapping up to the mid $140s, the stock is back down to $137s... to completely fill the gap it would need to go down to $135, but I'm willing to put a stake in the ground here. Beginning with a 1.3% position and willing to build on pullbacks. $115-$120 would be a nice area as this is where the stock has bottomed twice in the past month. Considering they just raised 2008 estimates by $1.25 it wouldn't make much sense to see such a fall, but what has been making sense of late. Throw a conservative 15 P/E ratio (for 100% earnings growth) on this extra $1.25 of 2008 earnings and you have +$20 in stock price. Instead we get +$3. I guess "it's all priced in"
EDIT 12:15 PM - that didn't take long. The bear market sneered at us for daring to buy anything. Already down to $130. So the gap is now fully filled and the stock is right back at its 50 day moving average. Folks buying in the mid $140s this morning are already enjoying a quick trip to the house of pain. Off in the distance a bear could be heard laughing. I'll take it up to 1.6% stake here with another smaller purchase. Next addition will be down in $115-$120 range. Which might be in a few hours. Just imagine if they had dared to miss ;) Let me guess - oil is down $3 so every stock that was loved yesterday when oil was up $3 must now be sold. Got it.
weakness in the global infrastructure names is mind boggling to me - Fluor (FLR), Jacobs Engineering (JEC), and Foster Wheeler (FWLT) are acting as if the world will end as oil falls to $120 (or $100). If you read the press releases on the type of contracts these names are putting out on a weekly basis it's an embarrassment of riches (wind, gas, petroleum, solar - they're everywhere), but the hedge fund computers prefer banks I suppose.
Flowserve is not the exact same type of company but off the same theme - yes the globe will slow but those with money (petrodollars and huge trade surplus) will continue their advancement. [Jul 12: Where is your Gas Money Going?] [Feb 27: $2 Trillion of Petrodollars Needs a Home this Year] We'll continue to purchase companies out performing in this period of market madness. But we won't make large purchases until the market acts rational and technicals improve.
Flowserve Corporation develops, manufactures, and sells precision-engineered flow control equipment, as well as provides a range of aftermarket equipment services. It operates in three divisions: Flowserve Pump, Flow Control, and Flow Solutions.
- The Flowserve Pump division offers engineered and industrial pumps and pump systems; submersible motors; replacement parts; and related equipment primarily to industrial markets. Its products include centrifugal pumps, positive displacement pumps, and specialty products and systems, such as hydraulic decoking systems, reactor recycle systems, and cryogenic liquid expanders.
- The Flow Control division designs, manufactures, and distributes industrial valve products, including actuators and accessories, control and ball valves, lubricated plug valves, condensate and energy recovery systems, pneumatic and electro pneumatic positioners, smart valves, steam traps, manual quarter-turn valves, valve automation systems, valve/actuator software, nuclear valves, and quarter-turn actuators.
- The Flow Solutions division offers mechanical seals, sealing systems, and parts principally to process industries. Its products include cartridge seals, dry-running seals, metal bellow seals, elastomeric seals, slurry seals, split seals, gas barrier seals, couplings, and accessories and support systems.
