Flowserve shares surge 33% on earnings beat; sheds asbestos liabilities

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Flowserve (FLS [https://seekingalpha.com/symbol/FLS]) shares jumped as much as 33% on Wednesday to a record high after the industrial equipment maker reported stronger-than-expected third-quarter earnings and announced a deal to permanently eliminate its long-standing asbestos liabilities.

The company, which manufactures pumps, valves and seals for the global energy and infrastructure sectors, reported adjusted earnings of $0.90 per share, beating Wall Street’s consensus estimate of $0.80.

Revenue came in in line with expectations at $1.21 billion, up 3.6% from a year earlier, as steady aftermarket demand offset softer original equipment sales.

Flowserve (FLS [https://seekingalpha.com/symbol/FLS]) also raised its full-year guidance, now projecting adjusted EPS between $3.40 and $3.50, up from a prior range of $3.25 to $3.40.

PROFIT AND MARGIN EXPANSION

The third quarter reflected a continuation of Flowserve’s (FLS [https://seekingalpha.com/symbol/FLS]) margin recovery, with gross margin improving 240 basis points to 34.8% on an adjusted basis. Adjusted operating margin rose sharply to 14.8%, compared with 11.1% a year earlier, driven by cost controls, favorable pricing and solid aftermarket performance.

Bookings totaled $1.21 billion, led by a 6% increase in aftermarket orders to more than $650 million. Power sector bookings surged 23% year-over-year, buoyed by $140 million in new nuclear project awards.

Cash flow from operations rose to $402 million, aided by higher earnings and a merger termination payment, while the company returned $173 million to shareholders through dividends and buybacks.

SHEDDING LEGACY ASBESTOS EXPOSURE

In a separate announcement, Flowserve (FLS [https://seekingalpha.com/symbol/FLS]) said it reached an agreement to transfer all of its remaining asbestos-related liabilities and related insurance assets to an affiliate of Acorn Investment Partners, a portfolio company of Oaktree Capital Management.

Under the deal, Acorn will assume full responsibility for BW/IP – New Mexico Inc., the subsidiary that holds Flowserve’s (FLS [https://seekingalpha.com/symbol/FLS]) asbestos obligations. Acorn will manage all current and future claims and fully indemnify Flowserve (FLS [https://seekingalpha.com/symbol/FLS]) against any future exposure. At closing, BW/IP will be capitalized with insurance assets and about $219 million in cash, including $199 million from Flowserve and $20 million from Acorn.

Flowserve (FLS [https://seekingalpha.com/symbol/FLS]) said the transaction will permanently remove all asbestos-related liabilities, insurance assets and deferred tax assets from its balance sheet. The company expects to record a one-time loss of roughly $135 million in the fourth quarter, which will be excluded from adjusted earnings, and anticipates an annual free-cash-flow benefit of $15 million to $20 million once the deal closes later this year.

FOCUS ON GROWTH AND STABILITY

Flowserve (FLS [https://seekingalpha.com/symbol/FLS]) said the divestiture marks a significant step in simplifying the company’s balance sheet and positioning it for future growth. The move frees up capital for acquisitions, product development and shareholder returns, priorities the company said will guide its strategy heading into 2026.

MORE ON FLOWSERVE

* Flowserve Corporation 2025 Q3 - Results - Earnings Call Presentation [https://seekingalpha.com/article/4834689-flowserve-corporation-2025-q3-results-earnings-call-presentation]
* Flowserve Corporation (FLS) Presents At Jefferies 2025 Industrials Conference (Transcript) [https://seekingalpha.com/article/4819743-flowserve-corporation-fls-presents-at-jefferies-mining-and-industrials-conference-2025]
* Flowserve: Continuing Alone Without Chart [https://seekingalpha.com/article/4810568-flowserve-continuing-alone-without-chart]
* Flowserve sheds legacy asbestos liabilities in $219M deal with Oaktree affiliate [https://seekingalpha.com/news/4509785-flowserve-sheds-legacy-asbestos-liabilities-in-219m-deal-with-oaktree-affiliate]
* Flowserve Non-GAAP EPS of $0.90 beats by $0.10, revenue of $1.2B misses by $10M [https://seekingalpha.com/news/4509721-flowserve-non-gaap-eps-of-0_90-beats-by-0_10-revenue-of-1_2b-misses-by-10m]