Flowserve Corp Earnings: Margins Keep Shrinking, but Net Income Increases

S&P 500 (NYSE:SPY) component Flowserve Corporation (NYSE:FLS) reported its results for the third quarter. Flowserve develops and manufactures flow control products and systems for the world’s most critical applications.

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Flowserve Earnings Cheat Sheet for the Third Quarter

Results: Net income for Flowserve Corporation rose to $107.8 million ($1.92 per share) vs. $103.9 million ($1.84 per share) in the same quarter a year earlier. This marks a rise of 3.7% from the year earlier quarter.

Revenue: Rose 15.5% to $1.12 billion from the year earlier quarter.

Actual vs. Wall St. Expectations: FLS beat the mean analyst estimate of $1.86 per share. Analysts were expecting revenue of $1.11 billion.

Quoting Management: Mark Blinn, Flowserve president and chief executive officer, said, “I am pleased with our performance this quarter, with top line growth and improved operating performance driving earnings up about 20%, excluding currency effects. We posted double digit growth in bookings, led primarily by our short cycle business but overall by broad based increases in activity in the chemical, general industries and oil and gas industries and across most regions. Our short cycle business remains strong, and our smaller project long cycle business is steady to improving, which balances continued competitiveness in large long-cycle project activity. “We saw our strongest ever aftermarket performance in the quarter, as our focus on expanding our global QRC footprint and growing our service capabilities continues to deepen our customer relationships. In addition, the continued dedication of our outstanding workforce on executing on our key strategies helped drive both year over year and sequential operating margin improvement. This generated positive operating momentum across the organization that we plan to build on as we close out the year and move into 2012.”

Key Stats:

Last quarter marked the fifth straight quarter that the company saw shrinking gross margins as gross margin fell 0.8 percentage point to 33.6% from the year earlier quarter. Over that time, margins have contracted on average 1.6 percentage points per quarter on a year-over-year basis.

The company has now seen net income rise in three straight quarters. In the second quarter, net income rose 7.7% and in the first quarter, the figure rose 20.9%.

The company has now topped analyst estimates for the last four quarters. It beat the mark by 16 cents in the second quarter, by 13 cents in the first quarter, and by 2 cents in the fourth quarter of the last fiscal year.

Revenue has now gone up for three straight quarters. In the second quarter, revenue rose 17.1% to $1.13 billion while the figure rose 4% in the first quarter from the year earlier.

Looking Forward: The outlook for the company’s results in the upcoming quarter is unfavorable. The average estimate for the fourth quarter is $2.28 per share, down from $2.38 ninety days ago. The average estimate for the fiscal year is $7.66 per share, down from $7.79 ninety days ago.

Competitors to Watch: Sauer-Danfoss Inc. (NYSE:SHS), IDEX Corporation (NYSE:IEX), Colfax Corporation (NYSE:CFX).

Investing Insights: Here’s Why Chipotle’s Stock Keeps Winning.

(Source: Xignite Financials)