Flowserve raises 2025 EPS outlook to $3.40–$3.50 amid record nuclear bookings and margin expansion

Earnings Call Insights: Flowserve Corporation (FLS) Q3 2025

MANAGEMENT VIEW

* CEO Robert Rowe stated the company "delivered exceptional results across bookings, margin expansion, earnings and cash flow" for the third quarter, highlighting increased confidence in achieving 2025 objectives and raising adjusted EPS guidance to $3.40 to $3.50, representing a 31% increase from last year and more than 60% from 2023.
* Rowe reported bookings of $1.2 billion, revenue growth of 4%, adjusted gross margins of 34.8%, adjusted operating margins at 14.8%, and adjusted EPS of $0.90, noting $173 million returned to shareholders, including $145 million in share repurchases.
* Rowe called attention to the company's "record" $140 million in nuclear bookings, with two major nuclear awards in Europe.
* He described a shift in business mix, stating that large-engineered projects are now a mid-single-digit percentage of bookings, compared to over 20% a decade ago, which "is driving more consistency in our bookings and revenue."
* The CEO emphasized the multiyear growth opportunity in nuclear, projecting "the potential for 40 new large nuclear reactors to be under construction in the next 10 years" and calling nuclear "one of the most compelling multiyear growth opportunities for Flowserve."
* CFO Amy Schwetz said, "Third quarter revenues were $1.2 billion, a 4% increase versus last year," attributing growth to the Mogas acquisition and strong aftermarket performance, while noting "organic sales were flat."
* Schwetz reported adjusted gross margins up 240 basis points and operating margins up 370 basis points, stating, "This represents the second consecutive quarter of operating margins within our long-term targeted range of 14% to 16%, which we originally set out to deliver by 2027."
* Schwetz highlighted the divestment of a small gear pump business and announced an agreement to divest legacy asbestos liabilities, stating it "simplifies our capital structure, reduces volatility and improves our annual cash flow."
* She noted, "In the quarter, we returned $173 million to shareholders, including $145 million of share repurchases," and that year-to-date repurchases through October reached $253 million.

OUTLOOK

* Schwetz announced, "We have increased our earnings outlook for the second time this year," now expecting "over 200 basis points of margin improvement for the full year."
* The midpoint of the raised full-year guidance reflects a "31% increase in EPS year-over-year and an impressive increase of more than 60% since 2023."
* The company signaled further details on the 2026 outlook will be provided on the next earnings call.

FINANCIAL RESULTS

* Rowe reported bookings of $1.2 billion for the quarter, growing 1% year-over-year and over $130 million sequentially.
* Aftermarket bookings exceeded $600 million for the sixth consecutive quarter, with two of the last three quarters above $650 million.
* Nuclear bookings set a company record at over $140 million.
* Schwetz reported "cash from operations of $402 million in the quarter" and a free cash flow conversion of 174% after adjusting for a merger termination payment.
* She detailed FPD (Flowserve Pump Division) adjusted operating margins "around 20%" and FCD (Flow Control Division) bookings growth of 24%, sales growth of 7%, and adjusted operating margins expanding 230 basis points.
* The Mogas acquisition contributed 3 points of growth to revenues, and its operating margins were described as "accretive to FCD."

Q&A

* Michael Halloran, Baird, asked about the forward pipeline and order funnel. Rowe replied, "On the aftermarket side, we delivered another very strong quarter at $650 million... we feel really confident that, that continues," while stating large OE projects now make up less than 10% of business, supporting diversification.
* Halloran followed up on pricing dynamics. Rowe stated, "We've really hammered price in the U.S. on the back of all of the tariff changes... we're at a price cost neutral basis, if not slightly positive."
* Andrew Kaplowitz, Citigroup, inquired about margin inflection in FCD and Mogas. Rowe reported, "Mogas is going incredibly well... the integration has gone incredibly well."
* Kaplowitz also asked about nuclear market share. Rowe explained, "We have equipment in 75% of those [400+ reactors]," and expects Flowserve to be a market leader in nuclear pumps and valves.
* Deane Dray, RBC Capital Markets, asked about the asbestos divestiture. Schwetz answered, "The benefits are -- will range from a cash flow perspective between $15 million and $20 million a year going forward."
* Dray queried free cash flow improvement. Schwetz targeted "something at the 100% level or a little bit better," citing margin expansion and working capital focus.
* Damian Karas, UBS, asked about nuclear award profitability and pricing. Rowe emphasized high barriers to entry and long relationships, stating, "We're very confident in our ability to retain that type of work, if not grow that work."
* Brett Linzey, Mizuho, asked about energy bookings down 19%. Rowe attributed this to a tough comp from three large Middle East projects in the prior year but expressed confidence in medium-term recovery.
* Nathan Jones, Stifel, pressed for specifics on nuclear market share and product content. Rowe noted, "We have content in 75%" of reactors and expects to maintain or increase that share.
* Joseph Giordano, TD Cowen, asked about Flowserve's ability to scale nuclear capacity and selectivity with SMR projects. Rowe said, "We're confident in our ability to ramp" and have been "very methodical about our approach."
* Andrew Obin, BofA Securities, discussed weakness in non-nuclear power bookings. Rowe explained timing impacts and said Flowserve is "more selective here just given the wider -- the broader kind of competitive offering with the traditional power set."

SENTIMENT ANALYSIS

* Analysts pressed on sustainability of nuclear bookings, margin trajectory in FCD and Mogas, asbestos liability impact, and backlog conversion, showing a neutral to slightly positive tone with cautious optimism about nuclear and margin expansion.
* Management's prepared remarks projected confidence, particularly in nuclear and aftermarket, while Q&A responses reinforced confidence with specific figures and strategic rationale; Rowe used assertive language such as "we feel really confident" and "we're very confident in our ability to retain that type of work."
* Compared to the previous quarter, analyst sentiment remains cautiously optimistic, but more focused on sustainability of recent gains, and management’s confidence has increased, especially regarding nuclear and margin performance.

QUARTER-OVER-QUARTER COMPARISON

* The company raised full-year adjusted EPS guidance from $3.25–$3.40 previously to $3.40–$3.50, and now expects over 200 basis points of margin improvement for the full year, compared to 200 basis points previously.
* Nuclear bookings have climbed to a record $140 million versus $60 million in Q2, with more bullish commentary on nuclear growth.
* FCD margin recovery accelerated, with Mogas now accretive to FCD, whereas in Q2, Mogas was dilutive.
* Capital return increased, with $173 million returned in Q3 compared to $60 million in Q2.
* Management tone shifted to greater confidence around 2025 and nuclear growth, while analysts remain interested in margin sustainability and nuclear opportunity.

RISKS AND CONCERNS

* Rowe commented on some "slowness in project timing for larger engineered projects, primarily in the energy end market."
* Schwetz noted that organic sales were flat, with original equipment revenue "slightly lower... due to the timing and composition of projects in the backlog."
* Management flagged continued focus on working capital and operational excellence as areas where "our work is not done."
* Analysts questioned the sustainability of nuclear bookings, backlog conversion, and margin expansion, and raised concerns about non-nuclear power and energy bookings.

FINAL TAKEAWAY

Flowserve management emphasized robust third-quarter performance, record nuclear bookings, and significant margin expansion, driving a second upward revision to full-year earnings guidance. The company highlighted a multiyear nuclear growth opportunity, strong aftermarket momentum, and disciplined capital allocation, including a major asbestos liability divestiture. With enhanced execution under the Flowserve Business System and a strong balance sheet, management signaled confidence in delivering continued growth and value for shareholders through 2025 and beyond.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/fls/earnings/transcripts]

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