Flowserve’s Earnings Call: Strong Start Amid Challenges

Flowserve ((FLS)) has held its Q1 earnings call. Read on for the main highlights of the call.

Flowserve’s recent earnings call painted a picture of strong operational performance, marked by impressive growth in bookings, revenue, and margin expansion. The company celebrated significant achievements in the nuclear and power sectors. However, the call was not without its concerns, as challenges related to tariffs and macroeconomic uncertainties were highlighted, alongside cash flow issues. Despite these external pressures, Flowserve’s robust operational results stood out.

Strong Start to 2025

Flowserve kicked off 2025 with a robust performance, as bookings surged by 18% to reach $1.2 billion. Revenue saw a 5% increase, while adjusted gross margins expanded by 180 basis points to 33.5%. The company’s adjusted earnings per share (EPS) also saw a significant rise, increasing nearly 25% to $0.72. This strong start underscores Flowserve’s operational strength and strategic execution.

Record Aftermarket Bookings

The company reported record aftermarket bookings, which almost hit $690 million. This marks the fourth consecutive quarter where bookings surpassed $600 million, driven by a substantial $50 million order in the nuclear sector. This achievement highlights Flowserve’s strong position and growing demand in the aftermarket segment.

Nuclear and Power Sector Growth

Flowserve’s nuclear bookings exceeded $100 million for the third consecutive quarter, showcasing the company’s strength in this sector. Additionally, power bookings rose more than 45% compared to the previous year, reflecting robust growth and increasing demand in these critical areas.

Operational Excellence and Margin Expansion

The company demonstrated operational excellence with adjusted operating margins increasing to 12.8%. The Flowserve Pump Division (FPD) operating margins reached 17.7%, showing a 280 basis point improvement. The Flow Control Division (FCD) also experienced margin expansion, indicating effective cost management and operational efficiency.

Tariff Impact Concerns

Flowserve faces significant challenges from tariffs, with a potential $90 million to $100 million annualized gross impact. The company is particularly exposed in the flow control side of its business. This concern underscores the external pressures that could affect future profitability.

Macroeconomic Uncertainty

The earnings call highlighted concerns over macroeconomic uncertainty, which could lead to a slowdown in project bookings in the latter half of 2025. Global market volatility and tariffs are significant factors contributing to this uncertainty.

Cash Flow Challenges

Flowserve reported a $50 million use of cash from operations in the quarter, driven by higher temporary working capital requirements. This cash flow challenge is an area of concern that the company will need to address moving forward.

Forward-Looking Guidance

Flowserve provided robust forward-looking guidance, buoyed by a strong start to the year. The company reaffirmed its full-year guidance, projecting organic growth of 3% to 5% and an adjusted EPS of $3.10 to $3.30, representing an 18% to 25% year-over-year increase. Despite potential macroeconomic uncertainties and tariff impacts, Flowserve is taking strategic actions to mitigate these challenges through price adjustments and supply chain optimizations.

In conclusion, Flowserve’s earnings call reflected a strong operational performance with significant growth in key sectors. While the company faces external challenges from tariffs and macroeconomic uncertainties, its strategic initiatives and robust guidance indicate a positive outlook. Investors and market watchers will be keen to see how Flowserve navigates these challenges while capitalizing on its strengths in the coming quarters.