Flowserve's Q2 Earnings Beat Estimates on Margin Expansion, Bookings Up Y/Y

FLS Records Strong Bookings Growth

Total bookings increased 25.5% year over year to $1.35 billion, driven by robust project activity across regions. Original equipment bookings surged 43.9% to $652.3 million, while aftermarket bookings rose 12.1% to a record $695.8 million.

The company ended the quarter with a backlog of $3.34 billion, up 16.9% year over year, reflecting sustained demand across its end markets despite geopolitical challenges in the Middle East.

Flowserve Segment Performance

Flowserve operates through two reportable segments — Flowserve Pump Division (FPD) and Flow Control Division (FCD).

FPD generated revenues of $814.1 million, down 0.6% year over year. Segment bookings climbed 29.6% to $938.1 million, reflecting strength in large engineered projects. Adjusted segment operating margin expanded 100 basis points to 21.3%.

FCD reported revenues of $357.3 million, down 3.8% year over year. Bookings increased 17.6% to $417.1 million. Segment operating margin improved 40 basis points to 12.6%.

FLS Margin Performance Improves

Cost of sales increased 0.4% year over year to $784.4 million. Gross profit declined 5.4% to $384.7 million, with the reported gross margin contracting 130 basis points to 32.9%. On an adjusted basis, gross margin expanded 100 basis points to 35.9%.

Operating income increased 3.3% year over year to $151.4 million, while the operating margin expanded 70 basis points to 13.0%. Adjusted operating margin also improved 70 basis points to 15.3%. The effective tax rate was 14.4%.

Flowserve's Balance Sheet and Cash Flow

At the end of the second quarter, Flowserve had $731 million in cash and cash equivalents compared with $760.2 million at the end of 2025. Long-term debt (due after one year) increased to $2.12 billion from $1.53 billion at the end of 2025, primarily reflecting acquisition-related financing.

In the first six months of 2026, cash generated from operating activities totaled $86.2 million compared with $104.2 million in the year-ago period. Capital expenditures were $33.8 million. During the first half of the year, the company paid $54.8 million in dividends and repurchased $25 million of its shares.

2026 Guidance for FLS

Flowserve updated its 2026 outlook. The company now expects organic sales to decline approximately 1% compared with the previous expectation of a 1% decline to 2% growth. Including acquisition/divestiture and foreign exchange impacts, total sales are projected to increase approximately 3%.

The company raised the low end of its adjusted earnings guidance and now expects adjusted earnings per share of $4.05-$4.20 compared with the earlier range of $4.00-$4.20. Flowserve continues to expect net interest expense of approximately $85 million, an adjusted tax rate of 21-22% and capital expenditures of approximately $100 million. Management noted that the updated sales outlook reflects the continued impact of geopolitical uncertainty in the Middle East, while confidence in margin expansion supported the higher earnings outlook.

Zacks Rank and Stocks to Consider

The company currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks from the same space are discussed below:

Applied Industrial Technologies AIT carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Applied Industrial’s earnings surpassed the consensus estimate in each of the trailing four quarters. The average earnings surprise was 4.0%.  In the past 60 days, the Zacks Consensus Estimate for Applied Industrial’s fiscal 2026 bottom line has inched up 0.1%.

RBC Bearings Incorporated RBC presently carries a Zacks Rank of 2. RBC Bearings’ earnings surpassed the consensus estimate in each of the trailing four quarters. The average earnings surprise was 6.2%. In the past 60 days, the Zacks Consensus Estimate for RBC’s fiscal 2027 earnings has increased 0.8%.

Generac Holdings GNRC currently carries a Zacks Rank of 2. Generac Holdings’ earnings topped the consensus estimate twice and missed on the other two occasions in the trailing four quarters. The average earnings surprise was 7.4%. In the past 60 days, the Zacks Consensus Estimate for GNRC’s 2026 earnings has been stable.

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