Flowserve Corporation Q1 FY2026 earnings call

Thanked associates for hard work. First quarter saw adjusted operating margin expand 230 basis points and adjusted EPS grow 18%. Maintained full year adjusted EPS outlook of $4 to $4.20. Advanced business system strategy. Matt Klopper promoted. First quarter bookings $1.15 billion, down 6% year over year. Aftermarket bookings $680 million, eighth consecutive quarter above $600 million. Impacted by Middle East events on sales and earnings. Responding to Middle East situation focusing on employee safety, adapting supply chain. Market fundamentals healthy. Continuing 80-20 and operational excellence initiatives, simplifying product offering, advancing commercial excellence.

In FPD, adjusted gross margin increased 300 basis points year over year to 37.7%, and adjusted operating margin rose 140 basis points to 19.1%. FPD bookings were $774 million, down 9% year over year, revenue was $745 million, down 5%, with a book to bill of 1.04 times. In FCD, adjusted gross margin was 35.2% with a 480 basis point year-over-year increase, and adjusted operating margin was 15.9%, up 370 basis points. FCD bookings were $374 million, roughly flat year over year, revenue was $328 million, down 10% year over year, with a book-to-bill of 1.14 times.

Maintains full year adjusted EPS outlook of $4 to $4.20. Expects organic sales to range from 1% decline to 2% increase, total sales growth 3%-6%. Anticipates adjusted operating margin expansion of approximately 100 basis points. Q2 sales expected to be down low to mid single digits year over year, Q2 earnings similar to first quarter. Anticipates Trillium Valves acquisition to close near mid-year.

Disruption in Middle East causing logistics shutdown, employee safety concerns, supply chain transportation delays, inflationary pressures, geopolitical uncertainty potentially leading to project delays or cancellations.

Q: Mike Holleran asked about orders, follow-up on next year outlook.

A: Discussed March numbers in line, project funnel up, resolution in Middle East important for long-term targets.

Q: Andy Kaplowitz inquired about 10% organic revenue decline, Q2 outlook.

A: Explained impact of Middle East disruption, slower book-to-ship in Jan-Feb, normalized in March, confident for Q2.

Q: Nathan Jones asked about margin impacts, Middle East reconstruction demand.

A: Talked about margin progression excluding one-time items, potential for Middle East reconstruction demand.

Q: Joe Giordano confirmed mid-single-digit bookings growth inclusive of Middle East, margin expansion.

A: Confirmed, Middle East disruption included in growth outlook.

Q: Dean Dre asked about nuclear backlog, Trillium synergy.

A: Spoke about nuclear backlog, Trillium acquisition synergy opportunities early days.

Q: Joe Ritchie asked about refining crack spreads impact, aftermarket.

A: Discussed refinery turnaround delays, emergency work, confidence in second half growth.

Q: Steve Volkman asked about weak MRO start, SG&A leverage.

A: Explained MRO weak start in North America, focus on SG&A scalability.

Q: Amit Mehrotra asked about margins, MRO customer changes.

A: Spoke about gross margin excluding one-time items, MRO customer dynamic changes