Oppenheimer Downgrades Flowserve Ahead Of Q1 Earnings

In a report published Friday, Oppenheimer analysts downgrade

from Outperform to Perform. The earning season has been lackluster across industrials due to the slowing down of global spending, especially in the energy segment, as well as the continued volatility in Fx. The downgrade is based on expectations of "sustained organic growth challenges in the intermediate term given increased global energy infrastructure deferral risks and potential for shorter cycle run-rate OE and AM sales to prove less resilient in what appears to be an increasingly cautious investment backdrop," the analysts explained. Oppenheimer expects Flowserve to revise its earnings downwards in the near term. "While strong booking/backlog trends in 4Q14 may prove supportive to 2015 results, recent market and competitor reads drive incremental caution on the outlook for not only large project OE order growth but also "runrate" original equipment and aftermarket demand," Oppenheimer stated. The analysts also believe that there could be limited margin expansion opportunities for the company, given the weak organic growth outlook for 2015 and 2016. Multiple expansion could also be capped in the intermediate term, in the absence of EPS and order growth acceleration. The EPS estimates for 2015 and 2016 have been revised down from $3.75 to $3.45 and from $4.10 to $3.65, respectively.