Flowserve Corp. (FLS) Monday reported a decline in profit for the first quarter, as gross margins dropped significantly although revenues increased. Nevertheless, earnings for the quarter trumped analysts' expectations, while revenues were in line. Going forward, the company backed its guidance for the full year 2012.
Gross margin for the quarter, the percentage of sales left after deducting production costs, dropped 150 basis points to 33.4 percent. Flowserve said the drop reflects sales mix shift to original equipment and shipments of low margin legacy backlog.
Financial Chief Mike Taff said, "As expected, our first quarter earnings and margins were impacted by several large, low margin project shipments booked in prior periods flowing through revenue."
Taff added that the company expects second-quarter margins to also be "similarly challenged," and anticipates improvement in the second half 2012.
Flowserve, which competes with Sulzer Pumps, Ebara Corp., and SPX Corp., said sales for the first quarter grew 7.8 percent to $1.07 billion from $997.21 million last year. Excluding negative currency effects, sales advanced 10.1 percent. Sales growth was mainly driven by increased original equipment sales and solid aftermarket sales in all divisions. Eleven analysts on consensus estimated revenues of $1.07 billion for the quarter.
Irving, Texas-based Flowserve's first-quarter attributable earnings dropped to $93.13 million or $1.69 per share from $96.98 million or $1.72 per share last year. Analysts polled by Thomson Reuters expected the company to report earnings of $1.62 per share for the quarter. Analysts' estimates typically exclude special items.
The company also recorded its strongest booking since third quarter of 2008. For the quarter, bookings rose 7.1 percent to $1.25 billion. Chief Executive Mark Blinn said the increase in bookings was led by solid long cycle original equipment orders in the chemical and oil and gas industries.
Looking forward, the company reaffirmed its 2012 earnings guidance range of $8.00 to $8.80 per share. Flowserve continues to expect its earnings performance for the balance of 2012 to be towards the second half of the year. Analysts currently expect earnings of $8.61 per share for the full year.
Flowserve also confirmed that it is well positioned to achieve 5 to 7 percent revenue growth target for 2012.
FLS closed Monday's trading at $114.93, down $0.95 or 0.82% on a volume of 0.6 million shares on the NYSE.
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