Core Viewpoint - Investors are increasingly seeking growth stocks that demonstrate above-average growth potential, particularly in the financial sector, to achieve exceptional returns, although identifying such stocks can be challenging due to inherent risks and volatility [1] Group 1: Company Overview - Flowserve is identified as a recommended growth stock due to its favorable Growth Score and top Zacks Rank, indicating strong growth prospects [2][10] Group 2: Earnings Growth - Flowserve has a historical EPS growth rate of 24.2%, with projected EPS growth of 12.9% for the current year, surpassing the industry average of 10.5% [5] Group 3: Cash Flow Growth - The company exhibits a year-over-year cash flow growth of 31.6%, significantly higher than the industry average of 4.5%, and has an annualized cash flow growth rate of 11.7% over the past 3-5 years compared to the industry average of 9.9% [6][7] Group 4: Earnings Estimate Revisions - There has been a positive trend in earnings estimate revisions for Flowserve, with the Zacks Consensus Estimate for the current year increasing by 0.3% over the past month, indicating potential for near-term stock price movements [8]

Financial Data and Key Metrics Changes - DXP sales grew 11.9% to $2 billion in fiscal 2025, with gross profit margins expanding 67 basis points to 31.5% [5][12] - Adjusted EBITDA reached a record $225.3 million, with an 11.2% margin, marking the first year of sustained 11%+ adjusted EBITDA margins [16][27] - Operating income increased 21.7% year-over-year to $176.9 million, and diluted earnings per share improved to $5.37, up from $4.22 in fiscal 2024 [5][27] Business Line Data and Key Metrics Changes - Innovative Pumping Solutions (IPS) sales grew 26.4% year-over-year to $390.3 million, driven by strength in energy and water-related project activity [9][19] - Service Centers delivered 11% total sales growth, including 9.8% organic growth, supported by diverse end markets [11][19] - Supply Chain Services experienced a modest decline of 1.4% year-over-year due to reduced activity at certain energy-related sites [12][22] Market Data and Key Metrics Changes - Energy represented 22% of DXP sales, followed by water and wastewater at 15%, general industry at 15%, chemical at 10%, and food and beverage at 7% [6][12] - Geographic regions with notable sales growth included Ohio River Valley, Southeast, Texas Gulf Coast, and California [12][21] Company Strategy and Development Direction - The company focuses on diversification of end market exposure while building scale in markets with a strong competitive position [6][14] - DXP completed 6 acquisitions in 2025, strengthening capabilities and expanding reach, while also executing a share repurchase program returning $17 million to shareholders [9][35] - The company aims to maintain margin discipline while driving organic growth and executing strategic acquisitions [14][30] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about demand across energy, water, and industrial markets, while remaining mindful of inflation dynamics and supply chain variability [14][30] - The company anticipates continued growth in 2026, with a focus on maintaining operational efficiency and leveraging recent acquisitions [14][30] Other Important Information - DXP generated $94.3 million in cash from operating activities, translating into $54 million of free cash flow during fiscal 2025 [13][32] - The company successfully refinanced its debt, improving flexibility and positioning for growth and acquisitions [9][30] Q&A Session Summary Question: Can you share daily sales trends by month for Q4 and Q1 thus far? - In Q4, daily sales were $7.5 million in October, $8.2 million in November, and $9.8 million in December, averaging $8.5 million per day [37] - January's daily sales were $6.9 million, typically the slowest month of the year [38] Question: Will there be a meaningful margin difference comparing Q4 with Q1? - Management indicated that water continues to be accretive to margins, and recent acquisitions should positively impact Q1 margins [40] Question: What are the positive dynamics developing in energy for the second half of the year? - Management noted a decline in Q4 energy-related backlog but observed increased quoting activity, suggesting potential for back-end weighted growth in 2026 [46][47]

Financial Performance - The company reported a full-year 2025 fully diluted EPS of $3.22, down from $3.86 in 2024, impacted by a $41.5 million pension settlement charge and $0.01 of restructuring charges [1] - On an adjusted basis, diluted EPS increased to $4.14 in 2025 from $3.92 in 2024, representing a 6% growth [1] - Full-year sales increased by 5.4% to $2.1 billion, with segment operating income rising by 9.6% [4][7] Growth Initiatives - Management highlighted the addition of over 35 products in 2025, expected to generate over $160 million in revenue by year three [2] - The company launched a "value acceleration office" to streamline operations using AI and process engineering [2] Cash Generation and Capital Deployment - Cash conversion was reported at 126% for the year, marking the third consecutive year above 120% [3] - The company maintained a strong balance sheet despite approximately $120 million in acquisitions and $160 million in share repurchases in 2025 [3][6] Segment Performance - Global Water Systems sales rose 6% for the year, with a 4.3% increase in the fourth quarter [10][11] - Energy Systems saw a 9% increase in fourth-quarter sales, but operating income declined due to geographic mix and tariffs [13] - Distribution segment sales increased by 2% for the year, with a significant 64% surge in operating income [14] Shareholder Returns - The company repurchased about 350,000 shares for approximately $34.3 million in the fourth quarter and raised the quarterly dividend by 5.7% [16] - The dividend increase marked the company's 34th consecutive year of dividend increases [16] 2026 Outlook - The company guided for 2026 sales between $2.17 billion and $2.24 billion, with adjusted EPS expected to be between $4.40 and $4.60, implying sales growth of around 3% and EPS growth of about 9% [7][17] - Management anticipates margin expansion across all segments, with specific growth expectations for water, energy, and distribution [18][20]

Q4 2025 EARNINGS CONFERENCE CALL February 6, 2026 FORWARD LOOKING STATEMENT AND NON-GAAP MEASURES Safe Harbor Statement: This presentation includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, as amended. Words or phrases such as, "may," "should," "expects," "could," "intends," "plans," "anticipate ...

Core Viewpoint - Growth investors are interested in stocks with above-average financial growth, but identifying stocks that can fulfill their potential is challenging due to associated risks and volatility [1] Group 1: Growth Stock Identification - The Zacks Growth Style Score helps in identifying promising growth stocks by analyzing real growth prospects beyond traditional metrics [2] - Flowserve (FLS) is currently recommended due to its favorable Growth Score and top Zacks Rank [2] Group 2: Earnings Growth - Earnings growth is crucial for attracting investor attention, with double-digit growth being particularly desirable [3] - Flowserve has a historical EPS growth rate of 19.6%, with projected EPS growth of 13.3% this year, surpassing the industry average of 10.2% [4] Group 3: Asset Utilization - The asset utilization ratio, or sales-to-total-assets (S/TA) ratio, indicates how efficiently a company generates sales from its assets [5] - Flowserve's S/TA ratio is 0.83, outperforming the industry average of 0.81, indicating better efficiency [5] Group 4: Sales Growth - Sales growth is another important metric, with Flowserve expected to achieve a 4.6% sales growth this year, compared to the industry average of 4.2% [6] Group 5: Earnings Estimate Revisions - Positive trends in earnings estimate revisions correlate strongly with stock price movements [7] - Flowserve has seen upward revisions in current-year earnings estimates, with a 0.2% increase in the Zacks Consensus Estimate over the past month [8] Group 6: Overall Assessment - Flowserve has a Zacks Rank of 2 and a Growth Score of A, indicating it is a potential outperformer and a solid choice for growth investors [9]

Core Insights - Flowserve Corporation (FLS) is experiencing growth driven by strong demand in its aftermarket business across North America, the Middle East, and Africa, contributing to the success of its Pumps Division [1] - The company anticipates total revenues to increase by 4-5% in 2025 compared to the previous year, supported by solid momentum in both original equipment and aftermarket businesses [1] Group 1: Business Performance - The Flow Control Division is benefiting from increased demand across various regions, including North America, Latin America, Asia Pacific, and Europe [1] - FLS completed the acquisition of MOGAS Industries in October 2024, enhancing its valve and automation product portfolio and increasing its exposure to mining and mineral extraction [2] - The acquisition of intellectual property and R&D from NexGen Cryogenic Solutions in July 2024 expanded FLS' LNG product portfolio, complementing its existing offerings [2] Group 2: Shareholder Returns - In the first nine months of 2025, FLS distributed $82.7 million in dividends and repurchased shares worth $197.9 million [3] - The company increased its quarterly dividend by approximately 5% to 21 cents per share in the first quarter of 2024 [3] Group 3: Financial Performance - FLS shares have gained 38.7% over the past six months, outperforming the industry growth of 7.1% [4] - The cost of sales increased by 1.5% year over year to $2.35 billion in the first nine months of 2025, with selling, general, and administrative expenses rising by 12.1% [5] Group 4: Risks and Challenges - Currency headwinds negatively impacted net earnings by $36.8 million in the first nine months of 2025, with the strong U.S. dollar affecting the company's top line [8]

Core Viewpoint - Growth stocks are appealing due to their potential for above-average financial growth, but identifying strong candidates can be challenging due to inherent volatility and risks [1] Group 1: Company Overview - Flowserve (FLS) is currently highlighted as a recommended growth stock by the Zacks Growth Style Score system, which evaluates a company's growth prospects beyond traditional metrics [2] - Flowserve has a favorable Growth Score and a top Zacks Rank, indicating strong potential for performance [2][10] Group 2: Earnings Growth - Historical EPS growth for Flowserve stands at 19.6%, but projected EPS growth for this year is expected to be 30.4%, significantly surpassing the industry average of 7.6% [5] Group 3: Asset Utilization - Flowserve's asset utilization ratio (sales-to-total-assets ratio) is 0.83, indicating that the company generates $0.83 in sales for every dollar in assets, which is higher than the industry average of 0.79 [6] Group 4: Sales Growth - The company's sales are projected to grow by 4.9% this year, compared to an industry average of 0% [7] Group 5: Earnings Estimate Revisions - There has been a positive trend in earnings estimate revisions for Flowserve, with the Zacks Consensus Estimate for the current year increasing by 2.5% over the past month [8]

Core Viewpoint - Flowserve (FLS) stock has surged 31% recently due to strong earnings, currently trading at $68.95, with a favorable outlook and a target price of $90, despite moderate operational performance and financial status [2][4]. Valuation - Flowserve's valuation appears low compared to the broader market, making it an attractive investment opportunity [5][6]. Growth - Flowserve has experienced a top-line expansion at an average rate of 10.5% over the last three years, with revenues increasing from $4.5 billion to $4.7 billion in the last 12 months, and quarterly revenues rising 3.6% to $1.2 billion [5][6]. Profitability - The company's operating income over the last 12 months was $462 million, reflecting an operating margin of 9.9%, with a net income of approximately $453 million and a net margin of 9.7% [9]. Financial Stability - Flowserve's financial stability appears very strong, with a debt of $1.7 billion and a debt-to-equity ratio of 18.5%, alongside a cash-to-assets ratio of 14.3% [9]. Downturn Resilience - Flowserve has shown significant underperformance compared to the S&P 500 during various economic downturns, with notable declines and recovery times [6][10].

Q3 2025 Financial Highlights - Total bookings reached $1.2 billion, a 1% increase[8] - Sales amounted to $1.2 billion, reflecting a 4% growth[8] - Adjusted gross margins improved to 34.8%, up by 240 basis points[8] - Adjusted EPS increased significantly to $0.90, a 45% rise[8] - Cash from operations totaled $402 million[8] - Adjusted operating margins reached 14.8%, an increase of 370 basis points[8] Bookings Overview - Original Equipment bookings were $560 million in Q3 2025 compared to $589 million in Q3 2024[13] - Aftermarket bookings increased to $653 million in Q3 2025 compared to $615 million in Q3 2024[13] - Power market bookings grew by 23%, while Chemical bookings increased by 18%[13] - Energy market bookings decreased by 19%[13] Nuclear Market Opportunity - The nuclear flow control opportunity is estimated to be over $10 billion in the next decade[25] - New large reactor projects represent an opportunity of over $100 million per reactor, while new SMR projects offer $20-80 million per reactor[26] - Recurring annual revenue from the global installed base is approximately $100 million[26] Full-Year 2025 Guidance - Total sales growth is projected to be up 4%-5%[46] - Adjusted EPS is expected to be in the range of $3.40-$3.50[46]

Core Insights - Flowserve Corporation (FLS) is positioned for growth due to strong performance across its segments, strategic acquisitions, and shareholder-friendly initiatives [1][4][9] - The company has achieved a Zacks Rank 1 (Strong Buy) and has outperformed the industry with a 21.1% gain over the past year compared to the industry's 10% growth [1][4] Business Strength - Flowserve is experiencing robust momentum in its Pump Division and Flow Control Division, driven by strong aftermarket demand in North America, the Middle East, and Africa [4] - The Flow Control Division's bookings increased by 5.9% year over year, supported by rising customer orders in energy and general industries [5] End Market Strength - The company's Diversify, Decarbonize, and Digitize (3D) strategy is enhancing booking levels, with ongoing investments in stormwater infrastructure and drainage projects contributing positively [6] - The chemical end market is benefiting from increased investments in petrochemical projects in the Middle East and Asia, while the power generation market sees solid bookings due to global investments in nuclear energy and combined-cycle power generation [6] - Flowserve reported $1.1 billion in bookings for Q2 2025, marking the 14th consecutive quarter with bookings exceeding $1 billion [6] Expansion Efforts - Flowserve has strengthened its business through acquisitions, notably acquiring MOGAS Industries in October 2024, which enhanced its valve and automation product portfolio [7] - The MOGAS acquisition contributed positively to sales growth, adding 2.6% to the Flow Control Division's performance in Q2 2025 [7][8] Rewards to Shareholders - The company has been rewarding shareholders through dividends and share buybacks, distributing $55.2 million in dividends and repurchasing $52.8 million in shares in the first half of 2025 [9]