FLS - Flowserve falls 9.2% after revealing technology disruptions one-time expenses

Flowserve ( NYSE: FLS ) on Wednesday fell as much as 9.2% to $27.96 a share after announcing disruptions related to implementing new technology to manage operations. The maker of pumps and other equipment said the difficulties and other corporate expenses will reduce third-quarter EPS by $0.18 to $0.22.

"While we are disappointed by these developments, we have confidence that the impact will be largely limited to the third quarter,” Scott Rowe, president and chief executive of Flowserve, said in a Sept. 13 statement. “The progress we have made in the past few weeks is significant, which should ensure that the impact to Flowserve and our customers is largely behind us.”

The operational disruptions were related to the implementation of a new enterprise resource planning (ERP) system at several of its facilities, according to the announcement. Flowserve also said it continues to expect bookings of more than $1 billion for the third straight quarter and that it sees greater stability in the global supply chain.

The company will provide more updates to its full-year guidance when it reports third-quarter results next month. Rowe was scheduled to speak today at the RBC Global Industrials Conference in Las Vegas, though the presentation won’t be webcast.

“We believe the ERP implementations are primarily related to the aftermarket seals business in North America,” Nathan Jones, an analyst at investment bank Stifel, said in a Sept. 13 report published after Flowserve’s announcement. “This business generates some of the highest margins within Flowserve.”

Stifel lowered its 2022 EPS estimate for Flowserve to $1.24 from $1.45, and said it expects Flowserve next month to update its full-year EPS guidance to $1.20-$1.40 from a prior range of $1.50-$1.70. The bank has a Buy rating on Flowserve.

Flowserve's shares recovered some of their early losses, falling to 5.8% to $29.00 by 11:09 a.m. on Wednesday.

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