Flowserve keeps profits flowing
Buybacks, dividends, and strong growth prospects point to gains for this oil service supply company.
Oil service supplier Flowserve (FLS) is driving ahead of its peers with a strong balance sheet, stock buyback program and robust dividend growth. The company's long-term market growth potential is attractive and the stock's technical indicators are bullish.
In a nutshell, Flowserve develops, manufactures and sells precision-engineered flow control equipment. With pipeline companies seeking to build capacity in the U.S., demand has been strong for equipment from heavy-duty valve and pump makers like Flowserve.
Flowserve is broadly diversified over five distinct industries. It is well positioned in emerging markets; in 2011, 52% of capital spending was targeted to emerging markets.
Financially, Flowserve expects revenue growth of 8% to 10% from 2011 to 2016. The company reaffirmed its EPS for 2012 from $8 to $8.80 a share, up from its 2011 estimate of $7.45 to $7.85.
The total five-year shareholder return is 128%, compared to industry peer average of 26%. And dividends have grown 21% per year from 2007 to 2011.
Since the beginning of the year, FLS has outpaced the oil services sub-sector, the broader energy sector, and recently, the S&P 500.
Since mid-July, FLS has traded higher above its 50-day and 200-day moving averages. Immediate support is at $119.10 with longer-term support at its July 11 low of $109.05.
I like Flowserve's long-term growth prospects. The company is well-diversified across business sectors and geographically, it's not dependent on just the oil and gas sector, and it has a solid footprint in rapidly growing emerging markets.
Its focus on shareholder returns with robust stock buybacks and dividends provides a solid support to downside risk. The stock has performed exceptionally well and it near its 52-week high. Buy on pullbacks for the long-term.
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Serious issues like drought and the deterioration of the developed world spell opportunity for this industry leader.
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