FLS - Flowserve upgraded to Buy at BofA on valuation clean-energy incentives

Flowserve ( NYSE: FLS ) on Monday was upgraded to Buy from an investment rating of Neutral by analysts at Bank of America. They said the maker of pumps and other equipment was undervalued and was poised to benefit from U.S. incentives for clean energy.

“Flowserve ( FLS ) is well positioned to capture growth related to decarbonization and new green tech,” Andrew Obin, analyst at Bank of America, said in a January 30 report. “Recent legislation, particularly the Inflation Reduction Act (IRA), provides material subsidies for decarbonization technology. This includes carbon capture and storage and hydrogen.”

President Biden signed the measure into law in August to offer tax breaks and other support for clean-energy projects such as wind farms and factories that make batteries, solar equipment or hydrogen fuel. The law so far has spurred multiple announced investments throughout the United States from businesses including startup Freyr Battery and the solar unit of Hanwha Group.

Flowserve’s ( FLS ) order backlog expanded 30% from a year earlier to $2.6 billion in Q3, a sign that demand is strong for its products, BofA said.

“The underlying terms and contract structure of the backlog are likely improving as well,” according to the report. “We think Flowserve ( FLS ) can achieve 30% gross margins in 2023, driving better incrementals.”

BofA raised its price target for Flowserve ( FLS ) to $40 a share from $33, based on an enterprise value-to-EBITDA multiple of 11 times, up from 9 times previously.

Flowserve's ( FLS ) stock in the past 12 months through January 27 rose 2.4%, contrasting with a less than 1% loss for the Standard & Poor's 400 midcap stock index ( SP400 ).

Seeking Alpha columnist Daniel Jones rates Flowserve ( FLS ) as a Hold because of disappointing earnings . Contributor GS Analytics has a Buy rating on Flowserve ( FLS ) because of operating improvements .

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