PresentationTze-Kiang WongGabelli Funds, LLC I'm really excited for our next presenter. Next up, we have Flowserve. Based in Irving, Texas, Flowserve is a leading manufacturer and aftermarket supplier of comprehensive flow control systems. The company operates in 2 segments. Flowserve Pump Division and Flowserve Control division. Flowserve's portfolio of products consist of pumps, valves, seals and automation that serve various end markets including oil and gas, chemical, power generation, wallet management ...

Franklin Electric (NasdaqGS:FELE) Q4 2025 Earnings call February 17, 2026 09:00 AM ET Company ParticipantsDean Cantrell - Director of Investor RelationsJennifer Wolfenbarger - CFOJoe Ruzynski - CEOConference Call ParticipantsBryan Blair - Managing Director and Research AnalystMatt Summerville - Managing Director and Senior Research AnalystMike Halloran - Senior Research AnalystRyan Connors - Managing Director and Research AnalystWalter Liptak - Industrial AnalystOperatorHello, and welcome to the Franklin El ...

Flowserve Corporation 2026 Conference Summary Company Overview - **Company**: Flowserve Corporation (NYSE: FLS) - **Industry**: Flow control products and services, including pumps and valves Key Points and Arguments Financial Performance and Targets - Flowserve achieved a **500 basis points margin improvement** over the last three years, exceeding the 2027 target framework set previously [4] - New long-range targets for 2030 include: - **Organic sales growth** of mid-single digits - **Margin expansion** of approximately **100 basis points per year**, aiming for **20% operating income** by 2030 - **Adjusted EPS growth** in double digits [5] Operational Excellence - The company has focused on **operational excellence** since 2018, enhancing productivity and reducing disruptive events that affect margins [11] - Significant training and competency improvements in manufacturing operations have been implemented [12] Portfolio Excellence - The **80/20 Program** was fully integrated across all product business units by 2025, focusing on high-potential products and customers [13] - The program aims to streamline operations and improve profitability while maintaining growth potential [31] Commercial Excellence - Flowserve is retraining its sales force to enhance commercial excellence, focusing on account segmentation and effective use of CRM systems [16][19] - Changes in incentive plans are designed to align sales efforts with strategic growth areas [20] Footprint Optimization - The company is actively consolidating manufacturing facilities, with plans for at least two consolidations each year [28] - This strategy aims to drive efficiencies and leverage existing capacity without significant new investments [30] Market Dynamics and Growth Areas - The company anticipates a **second half revenue acceleration** in 2026, driven by improved market conditions and project timing [40] - The aftermarket business is expected to grow at mid- to high-single digits, supported by a large installed base of pumps and valves [41][63] Nuclear and Power Markets - Flowserve has a strong position in the nuclear market, with equipment on **75% of all reactors** globally [96] - The company expects continued growth in nuclear bookings, particularly from life extensions and power re-rates [97] - Traditional power markets are also showing growth, with opportunities in coal and natural gas sectors [81] 3D Strategy: Diversify, Decarbonize, Digitize - The company has shifted its focus from upstream oil and gas to downstream and refining, reducing energy exposure from **40% to just over 30%** [84] - Flowserve is actively pursuing decarbonization projects and has seen success in carbon capture initiatives [88] - The **RedRaven** IoT technology is now profitable and expected to drive future growth through predictive maintenance and monitoring [120] Acquisition of Trillium - The acquisition of Trillium's valve division is expected to enhance Flowserve's nuclear offerings, increasing content per reactor by **15%-20%** [103] - This acquisition is anticipated to provide growth opportunities not only in nuclear but also in traditional power markets [111] Additional Important Insights - The company has reduced its supplier count by **50%**, improving supply chain efficiency and cost management [53] - Flowserve's focus on **selective bidding** for projects has led to improved margins, particularly in engineered pumps [56] - The company is optimistic about future growth in general industries, including water and mining applications [118] This summary encapsulates the key insights and strategic directions discussed during the Flowserve Corporation 2026 conference, highlighting the company's focus on operational and commercial excellence, market opportunities, and growth strategies.

Core Insights - Flowserve Corporation's fourth-quarter 2025 adjusted earnings per share (EPS) of $1.11 exceeded the Zacks Consensus Estimate of 94 cents, marking a 58.6% year-over-year increase driven by higher revenues [1][10] - Total revenues for the quarter were $1.22 billion, slightly below the consensus estimate of $1.26 billion, reflecting a 3.5% year-over-year growth [2][10] - The company reported a backlog of $2.9 billion, up 2.8% year over year, indicating a positive outlook for future revenue generation [2][10] Revenue and Earnings Summary - For the full year 2025, Flowserve generated revenues of $4.73 billion, a 3.7% increase from 2024, with adjusted earnings of $3.64 per share compared to $2.63 in 2024 [3] - In the fourth quarter, aftermarket bookings rose 10.4% year over year to $682.3 million, while original equipment bookings fell 5.5% to $526.6 million [2] Segment Performance - Flowserve's Pump Division reported revenues of $833 million, up 4.8% year over year, with bookings increasing 8.2% to $883.6 million and operating income rising 29.2% to $166.8 million [4] - The Flow Control Division generated revenues of $391.5 million, a 0.9% year-over-year increase, but bookings decreased 9.1% to $330.3 million, with operating income up 43.5% to $64 million [5] Margin and Cost Analysis - The cost of sales decreased by 1.4% year over year to $797 million, while gross profit increased by 14.3% to $425.2 million, resulting in a gross margin of 34.8%, up 330 basis points [6] - Operating income fell 66.2% year over year to $42.2 million, with an operating margin of 3.5%, down 710 basis points [6] Balance Sheet and Cash Flow - At the end of the fourth quarter, Flowserve had cash and cash equivalents of $760.2 million, up from $675.4 million at the end of 2024, while long-term debt increased to $1.53 billion [7] - The company generated net cash of $505.9 million from operating activities, an increase from $425.3 million in the previous year, with capital expenditures totaling $70.9 million, down 12.5% year over year [7][8] 2026 Guidance - Flowserve anticipates a revenue growth of 5-7% for 2026, with adjusted EPS projected between $4.00 and $4.20 [10][11] - The company expects an organic revenue growth of 1-3%, with a projected adjusted tax rate of approximately 21-22% and net interest expense of $80 million [11]

Core Viewpoint - Investors are increasingly seeking growth stocks that demonstrate above-average growth potential, with Flowserve (FLS) being highlighted as a strong candidate due to its favorable growth metrics and Zacks Rank [1][2]. Earnings Growth - Flowserve has a historical EPS growth rate of 19.6%, with projected EPS growth of 32% for the current year, significantly outperforming the industry average of 8.2% [5]. Asset Utilization Ratio - Flowserve's asset utilization ratio stands at 0.83, indicating that the company generates $0.83 in sales for every dollar in assets, which is slightly above the industry average of 0.82, showcasing its efficiency [6]. Sales Growth - The company's sales are expected to grow by 4.6% this year, contrasting with the industry average of 0%, indicating a strong sales growth outlook [7]. 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 3% over the past month, suggesting favorable near-term stock price movements [9]. Overall Assessment - Flowserve has achieved a Growth Score of A and a Zacks Rank of 2, indicating its potential as an outperformer and a solid choice for growth investors [11].

Financial Data and Key Metrics Changes - ITT reported total orders of nearly $1 billion for the third consecutive quarter, up 3% year-over-year, supported by strong order intake from recent acquisitions [7] - Revenue grew 13% in total and 6% organically, reaching $999 million, with operating income growing nearly twice the organic sales growth rate [8][17] - Adjusted EPS increased by 21%, and free cash flow rose 46% to $368 million year-to-date, with expectations to reach the high end of the previous range at $500 million for the full year [8][11] - Operating margin expanded over 100 basis points, excluding M&A impacts, with free cash flow margin in the quarter exceeding 15% [8][11] Business Line Data and Key Metrics Changes - Industrial Process (IP) grew 11% organically, driven by a projects business that grew over 50% [9][17] - Connect and Control Technologies (CCT) delivered 25% total growth, with 6% organic growth, bolstered by defense momentum and aerospace demand [10][17] - Motion Technologies (MT) grew 4% organically, outperforming global auto production by 360 basis points, with significant contributions from China [10][17] Market Data and Key Metrics Changes - Orders in the defense and aerospace sectors were strong, with CCT orders up 27% and 6% organic growth [12] - The market share in China for ITT has increased from 31% to above 34% [12] - Svanehøj secured over $250 million in orders year-to-date, representing 59% growth compared to the previous year [14] Company Strategy and Development Direction - The company is focused on organic growth and margin expansion, compounded with M&A activities, aiming for a strong performance towards its 2030 targets [7][25] - ITT continues to invest in innovations like Vidar, which is being installed with major energy companies in North America [8][11] - The company expects to maintain a book-to-bill ratio above one for the full year, indicating a strong position for growth in 2026 [15][21] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the operational performance and the ability to deliver for customers and shareholders despite market challenges [11][20] - The outlook for 2026 is cautiously optimistic, with expectations for low double-digit growth driven by a strong backlog and project wins [50][92] - Management noted that while auto production is expected to be up 2% year-over-year, challenges remain in Europe and North America [37][89] Other Important Information - The company is raising its full-year adjusted EPS outlook, with the low end of the revised guidance now above the previous high end, reflecting strong operational performance [11][21] - The effective tax rate is expected to be lower than planned, contributing positively to the EPS outlook [20][22] Q&A Session Summary Question: What is the outlook for global auto production? - Management indicated that global auto production is expected to be up 2% year-over-year, with China showing significant growth while Europe and North America may see slight declines [37][89] Question: Can you provide insights on the funnel and order conversion in Industrial Process? - The funnel for active projects is up 22% year-over-year, indicating strong potential for order conversion [39] Question: What factors contributed to the $0.20 guidance raise? - The guidance raise is attributed to improved profitability, better performance from acquisitions, and a favorable tax rate [47] Question: How is the pricing environment evolving? - The pricing environment varies by business segment, with CCT showing more pricing power, while IP requires a more strategic approach [113] Question: What are the prospects for improving growth in Aerospace and Defense? - Management expects continued growth in Aerospace and Defense, with orders anticipated to accelerate in Q4 [123]

Financial Data and Key Metrics Changes - Consolidated sales for Q3 2025 were $582 million, up over 9% year-over-year, driven by strong organic contribution and pricing actions [6][10][11] - Fully diluted earnings per share were $0.37 for Q3 2025, down from $1.17 in Q3 2024, primarily due to the termination of the U.S. pension plan impacting EPS by approximately $0.93 [10][11] - Adjusted fully diluted earnings per share increased by 11% to $1.30 for Q3 2025 compared to $1.17 in Q3 2024 [10][11] - Gross profit was $208.7 million, up from $189.7 million year-over-year, with gross profit as a percentage of net sales at 35.9%, an increase of 20 basis points [10][11][12] Business Segment Data and Key Metrics Changes - Water systems sales increased by 11% year-over-year, driven by price, volume, and acquisitions, with significant growth in Europe, the U.S., and Canada [7][14] - Energy systems sales rose nearly 15% year-over-year, with strong growth in the U.S., Europe, and India, despite expected moderation in Q3 due to seasonal factors [8][15] - Distribution segment sales increased by 3.4%, marking the strongest pricing performance in over two years, with operating income up 34% year-over-year [9][15][86] Market Data and Key Metrics Changes - The U.S. and Canadian markets for water systems performed well despite softer housing starts, indicating resilience and market share capture [7][14] - Internationally, energy systems sales outside the U.S. and Canada increased by 26%, led by growth in India and Europe [15] - The groundwater market in the U.S. was relatively flat, with expectations for low single-digit growth next year [56] Company Strategy and Development Direction - The company is focused on growth acceleration, resilient margins, strategic investments, and top-tier talent as part of its value creation framework [18] - Innovation is central to the growth strategy, with new product launches aimed at enhancing efficiency and reliability in the pressure-boosting market [19][20] - A new factory in Izmir, Turkey, is set to start production in Q1 2026, aimed at expanding capabilities in Eastern Europe and the Middle East [21][92] Management's Comments on Operating Environment and Future Outlook - Management expects a subdued market in the U.S. and Canada for 2026, with volume growth anticipated despite challenging macro conditions [27][30] - The company is optimistic about growth opportunities outside the U.S., particularly in Latin America and emerging markets [28][53] - Management highlighted the importance of customer intimacy and the ability to adapt to market needs as key drivers for future success [66] Other Important Information - The company announced a quarterly cash dividend of $0.265, payable on November 20, 2025 [17] - The effective tax rate for Q3 was 27%, up from 24% in the prior year, influenced by increased foreign earnings [16] Q&A Session Summary Question: Outlook for end markets in 2026 - Management anticipates a flattish market in the U.S. and Canada but expects volume growth driven by innovation and strong channel partnerships [27][30] Question: Impact of tariffs and geographic mix on energy systems margins - The majority of margin impacts are attributed to tariffs, with geographic mix contributing to a lesser extent [45] Question: Backlog growth in energy systems - Backlog growth is favorable, with positive trends expected in both U.S. and international markets [52][53] Question: Performance of groundwater market - The groundwater market is expected to remain flat, with low single-digit growth anticipated due to high replacement rates [56] Question: Distribution business margin improvements - Margin improvements are driven by better cost management, strategic pricing, and operational efficiencies [84][88] Question: Factory expansion in Turkey - The new factory is expected to start production in Q1 2026, with normalized margins anticipated in the latter half of the year [91][92]

Financial Data and Key Metrics Changes - The company reported second quarter earnings with adjusted EPS of $0.91, representing a 25% increase year-over-year [19][8] - Full year adjusted EPS guidance was increased to $3.25 to $3.40, reflecting a more than 25% year-over-year increase at the midpoint [7][30] - Revenue for the second quarter was $1.2 billion, a 3% growth compared to the prior year [19][7] - Adjusted gross margins expanded by 260 basis points to 34.9% [21][19] - Adjusted operating margins were reported at 14.6%, with impressive incremental margins of 94% during the quarter [8][21] Business Line Data and Key Metrics Changes - The Aftermarket business achieved bookings above $600 million for the fifth consecutive quarter, with aftermarket revenues growing by 7% [9][19] - Original Equipment sales decreased by 2%, primarily due to lower engineered-to-order work [20] - FPD (Flowserve Pump Division) reported a sales growth of 1% year-over-year, driven by aftermarket activity, with adjusted gross margins of 36.8% [23][20] - FCD (Flowserve Control Division) experienced a 2% growth in bookings and a 7% increase in sales, but margins were impacted by the Mogus acquisition [24][20] Market Data and Key Metrics Changes - Strong year-over-year growth of 9% was observed in general industries, while energy and chemical bookings decreased due to the non-recurrence of large projects [12][11] - The project funnel remains healthy, with a strong backlog of $2.9 billion, positioning the company well for future growth [14][15] - The nuclear project funnel is at its highest level, with total nuclear bookings of nearly $60 million in the second quarter [10][11] Company Strategy and Development Direction - The company remains committed to a disciplined approach to capital allocation, including M&A opportunities, despite the termination of the merger with Chart Industries [5][6] - The Flowserve business system is being fully implemented across all business units, focusing on operational excellence and margin expansion [17][21] - The company is excited about the potential of the Mogus acquisition to enhance offerings in the mining and minerals markets [24][25] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to execute at a high level despite a dynamic macro environment [7][6] - The company anticipates organic sales growth to range from 3% to 4% for the full year, a slight decrease from previous guidance [30][31] - Management noted that while the macroeconomic environment remains uncertain, the project funnel is growing, and they expect a book-to-bill ratio of approximately 1.0 for the full year [14][45] Other Important Information - The company received a $266 million termination payment from the terminated merger agreement, which will be evaluated for shareholder value creation [5][6] - The impact of tariffs is estimated to be neutral to earnings for the second quarter, with ongoing efforts to mitigate tariff impacts [15][16] - The company closed the quarter with a net debt to adjusted EBITDA ratio of 1.25 times, the lowest level in a decade, providing flexibility for capital allocation [29][28] Q&A Session Summary Question: Can you provide more insight into the bookings environment and expectations for the book-to-bill ratio? - Management indicated that while the macro environment has caused some project delays, the aftermarket business remains strong, and they expect a book-to-bill ratio of 1.0 for the year, with a positive outlook for the second half [40][45] Question: How should we view the potential improvement in the FCD segment moving forward? - Management acknowledged that while FCD margins are currently below expectations, they are implementing the same operational excellence strategies that have benefited FPD, and they expect improvements in the future [48][56] Question: What are the implications of the Chart merger experience on future growth ambitions? - Management confirmed that they remain open to M&A opportunities that align with their strategic goals, emphasizing a disciplined approach to any future transactions [60][66] Question: What are the biggest remaining levers for margin expansion in the FPD segment? - Management highlighted initiatives focused on aftermarket capture and the ongoing implementation of the 8020 program as key drivers for margin expansion [72][74] Question: Can you clarify the timing and impact of the remaining modular deliveries from Mogus? - Management confirmed that the last large fabrication is nearly complete and will be delivered in 2026, with a significant margin differential expected once these modules are cleared from the business [100][103]

Q2 2025 Financial Highlights - Total bookings reached $1.1 billion, driven by aftermarket and MRO activity[8, 11] - Sales amounted to $1.2 billion, representing a 3% revenue growth compared to the prior year[8] - Adjusted gross margins improved to 34.9%, a robust year-over-year increase of 260 basis points[8] - Adjusted EPS increased by 25% versus last year, reaching $0.91[8] - Adjusted operating margins increased by 210 basis points versus prior year to 14.6%[8] - Cash from operations generated a strong $154 million during the second quarter[8, 24] Segment Performance - FPD segment bookings were $723.8 million, a decrease of 19.5% year-over-year, while revenue increased by 0.8% to $818.9 million[21] - FPD adjusted gross margin was 36.8%, up 390 basis points year-over-year, and adjusted operating margin was 20.3%, up 340 basis points[21] - FCD segment bookings were $354.7 million, an increase of 1.6% year-over-year, and revenue increased by 6.8% to $371.5 million[22] - FCD adjusted gross margin was 30.8%, up 20 basis points year-over-year, while adjusted operating margin was 12.2%, down 120 basis points[22] Market Outlook and Tariffs - The company estimates the annualized gross impact of tariffs to be between $50 million to $60 million, which they expect to fully offset through mitigating actions[17] - The company expects full-year book-to-bill conversion ratio to be approximately 1.0x[14] Full Year 2025 Guidance - The company increased full-year earnings guidance on robust first-half results and continued execution momentum[30, 39] - Organic sales growth is expected to be up 3% - 4%, and total sales growth is expected to be up 5% - 6%[30] - Adjusted EPS is projected to be $3.25 - $3.40, which equates to nearly 60% growth in adjusted EPS since 2023[30, 32] - Expect full-year adjusted operating margin expansion of approximately 200 basis points[32]

Financial Data and Key Metrics Changes - The company reported consolidated sales of $587.4 million for Q2 2025, an 8% increase year-over-year [17] - Fully diluted earnings per share were $1.31, up from $1.26 in the prior year, reflecting a 6 cent increase [17] - Consolidated operating income reached $88.1 million, an 11% increase from $79.1 million in the previous year, with operating income margin at 15%, up from 14.6% [20][24] Business Line Data and Key Metrics Changes - Water Systems segment sales increased by 8% year-over-year, with operating income at $61.8 million, a slight decrease from the previous year due to margin pressures [13][22] - Energy Systems sales grew by 6%, with operating income rising to $29.1 million and operating income margin improving to 37.5% [14][24] - Distribution segment sales were $200 million, a 5% increase, with operating income at $16.1 million, reflecting a 300 basis point improvement in operating income margin [15][22] Market Data and Key Metrics Changes - Sales in markets outside the US and Canada for Water Systems increased by 12%, with foreign currency translation negatively impacting sales by 1% [21] - The company noted a healthy backlog and order trends, indicating stability in demand across various markets [6][65] Company Strategy and Development Direction - The company is focused on innovation, global portfolio expansion, and strengthening its leadership position in key markets [28] - Recent acquisitions are performing well, and the company aims to leverage synergies to enhance operational efficiency [29] - The company plans to maintain its capital return strategy while investing in growth opportunities [29] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in sustaining momentum despite global market uncertainties related to tariffs and commodity inflation [8][26] - The company anticipates a normal market cadence in the second half of the year, with a focus on executing its growth strategy [65][66] Other Important Information - The company ended Q2 2025 with a cash balance of $104.6 million and generated $52 million in net cash flows from operating activities [25] - A quarterly cash dividend of 26.5 cents was announced, payable on August 21 [25] Q&A Session Summary Question: Did Q2 benefit from pull forward orders? - Management indicated there was no significant pull forward from Q3 to Q2, stating it was business as usual [36] Question: How much did cost actions contribute to margin expansion in the distribution segment? - Cost actions contributed about a third of the 300 basis points margin expansion, with operational efficiency also playing a significant role [38] Question: Update on integration at PumpEngine and Barnes? - Integration is progressing well, with strong growth synergies being realized faster than expected [41] Question: Insights on the water segment's product mix? - Most of the mix pressure is product-driven, with a strong order book and backlog expected to support performance in the back half [49] Question: What catalysts are expected for the residential market? - The company is focusing on new product innovations and believes it can offset weaker housing starts through its high service and replacement demand [53] Question: Thoughts on the M&A pipeline? - The company has a robust M&A pipeline and is optimistic about future opportunities to enter faster-growing markets [68] Question: Strength in orders and backlog compared to last year? - Backlogs are up in the low double digits year-over-year, with a book-to-bill ratio above one for all segments [83]