Flowserve Lowers 2026 Sales View as Backlog Hits Record

Flowserve Corp. (FLS) lowered its full-year 2026 sales outlook after disruption in the Middle East weighed on third-quarter shipments, even as strong project demand and record aftermarket orders lifted backlog to a new high. The company also raised the low end of its adjusted earnings-per-share forecast, citing strong year-to-date performance and continued margin expansion.

Flowserve now expects 2026 organic sales to decline 1.5% to 2.5%, compared with its previous forecast for a decrease of approximately 1%. Total sales are projected to grow 2% to 3%, versus the prior expectation of about 3% growth. The company narrowed its adjusted EPS range to $4.10 to $4.20 from $4.05 to $4.20.

Third-quarter sales rose 5.4% year over year to approximately $1.2 billion, supported by acquisitions and divestitures, which added 6.7 percentage points. Organic sales declined 1.2%, while foreign exchange had a 0.1-point negative impact. Flowserve said Middle East conditions reduced quarterly sales by about $40 million, modestly more than expected. Its sales bridge also showed an approximately three-point Middle East headwind and a roughly one-point impact from its 80/20 program.

Profitability improved despite the sales disruption. Adjusted gross margin increased 190 basis points to 36.7%, while adjusted operating margin expanded 170 basis points to 16.5%. Adjusted EPS rose 19% to $1.07. On a GAAP basis, Flowserve reported operating income of $154.6 million, net earnings of $103.0 million and diluted EPS of $0.81.

Record backlog supports future sales

Bookings increased 14% to approximately $1.38 billion, or 8% on an organic basis, producing a book-to-bill ratio of 1.12. Original-equipment bookings rose 17% to $656 million as global project activity remained strong. Aftermarket bookings increased 11% to a record $728 million, marking the fifth consecutive quarter above $650 million.

Backlog reached a record $3.47 billion, up 20% from a year earlier and 4% from the second quarter. Flowserve maintained its expectation for mid-single-digit organic bookings growth for the full year after posting 6% organic growth through the first nine months.

Energy, which represented 38% of quarterly bookings, recorded 40% growth in the quarter and 25% growth year to date. Management attributed the increase to global investment in energy security and liquefied natural gas. Power bookings rose 23%, including more than $115 million of nuclear orders. Chemical bookings were flat, while general-industries bookings fell 8%.

The Flowserve Pumps Division reported bookings of $940 million, up 14.7% and 10.9% organically. Sales increased 3.8% to $830 million but declined 0.9% organically. The division’s adjusted operating margin expanded 220 basis points to 21.8%, reflecting mix benefits, the 80/20 program and improved project execution.

The Flow Control Division generated $446 million of bookings, an increase of 12.6%, though organic growth was limited to 0.8%. Sales rose 9.1% to $412 million but fell 1.3% organically. Adjusted operating margin was unchanged at 16.3%, including the effect of Middle East headwinds. Flowserve said the regional operating environment reduced book-and-ship activity in both divisions.

Middle East pressure expected to continue in Q4

Flowserve said conditions became more challenging late in the third quarter, delaying shipments and modestly slowing customer collections. The company expects a larger sales headwind from the region in the fourth quarter if the current operating environment continues. Some project approvals may shift into 2027, although the project funnel remains active.

For the fourth quarter, management assumes mid-single-digit organic sales growth, low-double-digit total sales growth and sequential expansion in adjusted operating margin. For the full year, Flowserve expects adjusted operating margin to increase by approximately 150 basis points and remain near 16%, keeping the company on its stated path toward a 20% target in 2030.

The company said its 80/20 program is in its third year and should provide further margin opportunities over at least the next two years. Actions involving the acquired Trillium business, portfolio simplification, productivity improvements and facility consolidation are also underway.

Operating cash flow totaled $144 million in the quarter. Free cash flow represented 92% of adjusted net earnings, and Flowserve expects full-year conversion of approximately 80%. Net leverage declined to 1.5 times from 1.8 times in the second quarter.

Flowserve returned $78 million to shareholders, consisting of $50 million in share repurchases and $28 million in dividends. Its board increased the share-repurchase authorization to $500 million, effective October 2026. The company also reduced its full-year capital-spending forecast to approximately $90 million from about $100 million.

The outlook remains subject to continued Middle East disruption, possible project delays, backlog cancellations, supply-chain and inflation pressures, tariffs, foreign-exchange movements and customers’ willingness to fund capital and maintenance spending. Flowserve also noted that bookings may not convert into sales at acceptable margins and that geopolitical or trade-related developments could affect its international operations.