The Truth about Flowserve’s Cash Flow in 2Q16
Flowserve Surged Anyway: Reinterpreting FLS's 1Q16 Earnings
Flowserve’s cash flow
Flowserve Corporation (FLS) saw a decline in its cash balance in 1Q16. The company’s cash balance stood at $310.3 million for the quarter, which is 7% lower than the $333.7 million it had in 1Q15.
Flowserve’s cash outflow from operations declined in 1Q16 on the back of a reduced working capital requirement. FLS’s cash from operations declined by 91% over 1Q15 to $8.0 billion in 1Q16.
Flowserve’s cash flow from investing activities declined from $425 million in 1Q15 to $20 million in 1Q16. This was mainly led by lower capital expenditures and acquisitions in 1Q16. In 1Q15, the company’s acquisition amount stood at $340 million (FLS acquired industrial product division of SIHI Group [SIHI]).
Flowserve’s cash flow from financing
FLS’s cash from financing activities mainly consisted of proceeds or payments of debt, dividends, and share buybacks. FLS’s dividend has grown steadily over the past three years. In 1Q16, FLS’s cash outflows on account of dividends stood at $23 million in 1Q16, as compared to $22 million in 1Q15.
Flowserve currently trades at a dividend yield of ~1.5%. The dividend yield is a measure of annual dividend per share, compared to the price of the share. FLS’s peers Graco (GGG), Emerson Electric (EMR), and Xylem (XYL), currently trade at dividend yields of 1.6%, ~3.4%, and ~1.4%, respectively.
If you are looking for exposure to global industrials stocks, you can consider the Industrial Select Sector SPDR ETF (XLI).
Now let’s look at analyst expectations for Flowserve.
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