Flowserve(US:FLS)2024-02-21 22:32Financial Data and Key Metrics Changes - For the full year 2023, the company achieved nearly 20% year-over-year revenue growth, with revenues exceeding $4.3 billion [23][32] - Adjusted earnings per share (EPS) increased by over 90%, reaching $2.10 for the full year [23][24] - Operating cash flow improved by over $360 million compared to 2022, totaling $326 million for the year [13][32] Business Line Data and Key Metrics Changes - Fourth quarter sales reached nearly $1.2 billion, with adjusted operating margins expanding to 10.5% [4][8] - The aftermarket business generated nearly $2.3 billion in bookings for the full year, up 5% year-over-year [26] - The Flow Control Division (FCD) achieved its highest quarterly adjusted gross margins since 2019 at 32.2%, a 310 basis point improvement year-over-year [10] Market Data and Key Metrics Changes - The total project funnel increased by 13% year-over-year, with the oil and gas funnel up 25%, driven by mid and downstream activity in the Middle East [6][9] - Notable year-over-year sales growth was observed in the Middle East and Africa (27%), North America (14%), and Europe (13%) [9] - The energy transition project funnel increased nearly 25% year-over-year, driven by decarbonization activities [27] Company Strategy and Development Direction - The company is focused on its 3D growth strategy, which aims to drive accelerated growth in diverse markets, including new energy applications [37][38] - The company plans to invest in both internal programs and inorganic growth opportunities, with capital expenditures expected between $75 million and $85 million [15] - The strategic focus includes enhancing the aftermarket capture rates and expanding the installed base to support long-term growth [65][111] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the operating momentum and expects full-year revenue growth of 4% to 6% in 2024, with adjusted EPS guidance between $2.40 to $2.60 [14][19] - The company anticipates a book-to-bill ratio over 1x, which will help build backlog and support multi-year revenue growth [14][19] - Management noted that while project delays occurred, they remain optimistic about the viability of these projects in 2024 [38][108] Other Important Information - The company generated $195 million in operating cash flow during the fourth quarter, a $125 million increase year-over-year [13][29] - A 5% increase in the dividend to $0.21 per share was authorized by the Board, along with a replenishment of the share repurchase capacity to $300 million [35][97] - The adjusted tax rate for the full year was 15.1%, which was lower than expected due to the release of valuation allowances on certain foreign deferred tax assets [33] Q&A Session Summary Question: What is the outlook for bookings growth and project conversion? - Management indicated strong growth in the aftermarket, expecting continued demand, while the project funnel is up 13%, with oil and gas projects up 25% [43][44] Question: How does the competitive landscape look currently? - The competitive environment has improved, with more discipline among competitors compared to two years ago, although challenges remain [72][73] Question: What are the expectations for cash generation and capital allocation in 2024? - The company expects to generate strong cash flow and is focused on investing in growth opportunities while also considering share buybacks [97][98]