Flowserve: Flow Control on a Roll

02/20/2014 11:00 am EST


Jim Jubak

Founder and Editor, JubakPicks.com

Yesterday, shares of this leading provider of flow control products and services rose considerably, and MoneyShow's Jim Jubak, thinks the answer as to why, can be found in the fourth quarter trends.

So, why did shares of Flowserve (FLS) soar 5.7%, yesterday?

Sure, the maker of all things that move water and other fluids beat Wall Street earnings projections for the fourth quarter by 6 cents a share (after excluding one-time charges) and revenue climbed 4.6% year over year, matching analyst estimates.

But the company did issue guidance for 2014 that was, at $3.65 to $4.00 a share, only slightly ahead of the Wall Street consensus of $3.94. Revenue for 2014 will grow, the company projects, by just 2% to 6% to $5.10 to $5.25 billion. That barely hits the current $5.25 billion consensus.

I think the answer for the stock's jump is in the fourth quarter order trends. (Flowserve is a member of my Jubak's Picks portfolio.)

In the fourth quarter, bookings climbed to $1.25 billion, an increase of 15.7%. Bookings for original equipment climbed by 21.6% to $722 million, and aftermarket orders hit a record $531 million, or an 8.5% increase.

That's a big step up in growth at the end of the year, in comparison to the full 2013 year. For all of 2013, orders climbed 3.6%. Original equipment bookings grew by 3.9% and aftermarket orders rose by 3.0%.

In a US stock market trading near record highs, and hungry for growth stories, the promise of acceleration in those fourth quarter orders figures was more than enough, yesterday.

I'm sure it didn't hurt either that the company raised its dividend by 14.3%.

As of February 19, I'm raising my target price on Flowserve to $88 a share by September 2014, from the current target of $84 a share.

Full disclosure: I don't own shares of any of the companies mentioned in this post in my personal portfolio. When in 2010 I started the mutual fund I manage, Jubak Global Equity Fund, I liquidated all my individual stock holdings and put the money into the fund. The fund may or may not now own positions in any stock mentioned in this post. The fund did own shares of Flowserve as of the end of December. For a full list of the stocks in the fund see the fund's portfolio here.

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