Here's Why You Should Hold on to Flowserve Stock Right Now

Flowserve (FLS) is benefiting from strong aftermarket demand, particularly in North America, Europe, the Middle East, and Latin America, with the Pumps Division's bookings up 21.2% year-over-year. Strategic acquisitions, including MOGAS Industries and NexGen Cryogenic Solutions, have expanded Flowserve's product portfolio and market presence, contributing 3.3% to sales growth in Q1 2025; however, the company faces challenges from rising costs and adverse currency fluctuations, which negatively impacted sales growth by 2.2% in the same period.

Analysis

Flowserve Corporation (FLS) is demonstrating operational strength, primarily driven by robust momentum in its aftermarket business, evidenced by a 21.2% year-over-year increase in its Pumps Division bookings in the first quarter, achieving a book-to-bill ratio exceeding 1.0x. This growth is supported by strong demand across key geographies including North America, Europe, the Middle East, and Latin America, and is complemented by increased bookings in the Flow Control Division across general industries, energy, and power end markets. The company's Diversify, Decarbonize, and Digitize (3D) strategy is successfully fueling booking levels, with notable project wins in the energy sector, anticipated chemical capacity expansions in the Middle East, and growth in the power generation market linked to data center and Artificial Intelligence activity. Strategic acquisitions, such as MOGAS Industries (completed October 2024), which contributed 3.3% to sales growth in the first quarter of 2025, and intellectual property from NexGen Cryogenic Solutions (acquired July 2024), are enhancing Flowserve's product portfolio and market reach, particularly in mining and LNG. The company is also actively returning capital to shareholders, distributing $27.6 million in dividends and repurchasing $21.1 million in shares during the first three months of 2025. Despite these positive indicators and a 1.7% share price gain over the past year, outpacing the industry's 0.2% growth, Flowserve faces headwinds. Rising operating costs are a concern, with the cost of sales increasing 3.6% year-over-year in Q1 2025 to $775.2 million, representing 67.7% of net sales, and selling, general, and administrative expenses rising 6.5% in the same period. Furthermore, adverse currency fluctuations negatively impacted sales growth by 2.2% in the first quarter of 2025, reflecting risks associated with its significant international operations. The stock currently holds a Zacks Rank #3 (Hold).

Key Decisions for Investors

• Given Flowserve's solid booking momentum, strategic acquisitions enhancing its portfolio, and commitment to shareholder returns, investors may consider maintaining existing positions, aligning with the current Zacks Rank #3 (Hold) rating.
• Investors should closely monitor Flowserve's ability to manage rising input costs and SG&A expenses, as these factors could continue to pressure margins despite top-line growth and strong aftermarket demand.
• The impact of foreign exchange fluctuations on sales and profitability warrants ongoing attention, particularly in light of the 2.2% negative impact on Q1 sales, and should be factored into risk assessments for this globally diversified company.
• Future earnings reports should be scrutinized for sustained booking strength, particularly in the Pumps Division, evidence of successful integration and synergy realization from the MOGAS and NexGen acquisitions, and commentary on managing cost inflation.