Cuộc họp công bố kết quả kinh doanh Quý 3/2026 của Flowserve (FLS): Lượng đơn hàng tồn đọng kỷ lục, nâng dự báo EPS

Điểm tin chính

• Flowserve đã báo cáo doanh thu quý 3/2026 đạt 1,24 tỷ USD, tăng 5% so với cùng kỳ năm ngoái trên cơ sở báo cáo, nhưng giảm khoảng 1% theo tỷ lệ hữu cơ.
• Lượng đơn đặt hàng tăng 14% lên 1,4 tỷ USD, hoặc tăng 8% theo tỷ lệ hữu cơ, đạt tỷ lệ đơn đặt hàng trên doanh thu là 1,12 lần. Giá trị đơn hàng tồn đọng đạt mức kỷ lục 3,5 tỷ USD, tăng 20% so với cùng kỳ năm ngoái và tăng 4% so với quý trước.
• Biên lợi nhuận hoạt động điều chỉnh mở rộng 170 điểm cơ bản so với cùng kỳ năm ngoái lên 16,5%, trong khi EPS điều chỉnh tăng 19% lên 1,07 USD.
• Lượng đơn đặt hàng dịch vụ hậu mãi tăng 11% lên mức kỷ lục 728 triệu USD. Lượng đơn đặt hàng thiết bị gốc tăng 17% lên 656 triệu USD, nhờ sự hỗ trợ từ các dự án điện, hạt nhân và năng lượng.
• Ban lãnh đạo đã nâng mức đáy của dự báo EPS điều chỉnh cả năm lên 4,10-4,20 USD, nhưng điều chỉnh triển vọng doanh thu để phản ánh tình trạng gián đoạn ngày càng tồi tệ ở Trung Đông.
• Flowserve đã hoàn trả 78 triệu USD cho các cổ đông trong quý. Hội đồng quản trị của công ty đã nâng hạn mức ủy quyền mua lại cổ phiếu lên 500 triệu USD.

Dữ liệu tài chính chính

Kết quả kinh doanh và hoạt động

Doanh thu dịch vụ hậu mãi tăng 12%, trong khi doanh thu thiết bị gốc giảm 2% do thời điểm chuyển đổi đơn hàng tồn đọng. Ban lãnh đạo cho biết sự mở rộng biên lợi nhuận đến từ cơ cấu dịch vụ hậu mãi, các hành động tối ưu danh mục 80/20 và hiệu quả vận hành, dù bị triệt tiêu một phần bởi chi phí SG&A tăng cao.

Lượng đơn đặt hàng của Bộ phận Bơm Flowserve tăng 15% lên 940 triệu USD, tương đương mức tăng 11% theo tỷ lệ hữu cơ. Doanh thu tăng 4% lên 830 triệu USD nhưng giảm 1% theo tỷ lệ hữu cơ. Biên lợi nhuận hoạt động điều chỉnh đạt 21,8%, tăng 220 điểm cơ bản, phản ánh cơ cấu sản phẩm thuận lợi, các biện pháp tối ưu danh mục và việc thực thi dự án được cải thiện.

Lượng đơn đặt hàng của Bộ phận Kiểm soát Dòng chảy tăng 13% lên 446 triệu USD, hoặc tăng 1% theo tỷ lệ hữu cơ. Doanh thu tăng 9% lên 412 triệu USD nhưng giảm 1% theo tỷ lệ hữu cơ. Biên lợi nhuận hoạt động điều chỉnh không đổi ở mức 16,3%, do sản lượng tại Trung Đông thấp hơn và việc hợp nhất Trillium trước khi đạt được hiệu ứng cộng hưởng đầy đủ đã triệt tiêu tiến độ vận hành.

Đơn đặt hàng mảng Năng lượng tăng 40% trong quý và tăng 25% từ đầu năm đến nay. Kết quả này bao gồm một dự án trị giá hơn 50 triệu USD, một dự án nâng cấp nhà máy lọc dầu ở Trung Đông và các đơn đặt hàng bổ sung cho dự án LNG ở Canada. Ban lãnh đạo cho biết môi trường dự án diện rộng vẫn lành mạnh bên cạnh hợp đồng lớn này.

Đơn đặt hàng mảng Điện lực tăng 23% trong quý 3 và tăng 12% từ đầu năm đến nay. Đơn đặt hàng mảng Hạt nhân vượt 115 triệu USD, chủ yếu đến từ các dự án gia hạn tuổi thọ lò phản ứng ở Mỹ. Flowserve đã ghi nhận hơn 100 triệu USD đơn đặt hàng hạt nhân trong mỗi quý của 3 quý đầu năm 2026.

Đơn đặt hàng ngành công nghiệp chung giảm 8% so với mức nền so sánh cao của cùng kỳ và giảm 1% từ đầu năm đến nay. Các mảng dược phẩm, nước và khai khoáng đã tăng trưởng trong quý. Ban lãnh đạo cũng xác định hệ thống làm mát bằng chất lỏng cho trung tâm dữ liệu là một cơ hội mới nổi, nhưng cho biết còn quá sớm để định lượng tiềm năng đóng góp cho Flowserve.

Dự báo của Ban lãnh đạo

Flowserve hiện dự báo doanh thu hữu cơ cả năm sẽ giảm 1,5%-2,5%, phản ánh hoạt động nhận và giao đơn hàng yếu hơn tại Trung Đông và một số áp lực đối với dịch vụ hậu mãi toàn cầu khi các cơ sở chế biến hoạt động ở mức công suất cao. Tổng doanh thu dự kiến tăng 2%-3%, bao gồm đóng góp tốt hơn một chút từ các thương vụ thâu tóm.

EPS điều chỉnh cả năm dự kiến đạt 4,10-4,20 USD sau khi ban lãnh đạo nâng mức đáy của khoảng dự báo. Tại điểm giữa của khoảng dự báo, triển vọng này tương ứng mức tăng trưởng 14% và dựa trên giả định biên lợi nhuận hoạt động điều chỉnh mở rộng khoảng 150 điểm cơ bản. Ban lãnh đạo cũng kỳ vọng biên lợi nhuận hoạt động điều chỉnh đạt khoảng 16% cho năm 2026.

Trong quý 4, ban lãnh đạo kỳ vọng doanh thu hữu cơ tăng trưởng ở mức giữa một chữ số và tổng doanh thu tăng trưởng ở mức thấp hai chữ số. Biên lợi nhuận hoạt động điều chỉnh dự kiến sẽ cải thiện so với quý trước, nhờ đòn bẩy sản lượng, cơ cấu sản phẩm, lợi ích từ Hệ thống Kinh doanh Flowserve và hiệu ứng cộng hưởng từ việc tích hợp Trillium.

Tỷ lệ chuyển đổi dòng tiền tự do cả năm hiện dự kiến đạt khoảng 80% lợi nhuận ròng điều chỉnh, phản ánh việc chậm giao hàng ở Trung Đông và thu hồi nợ chậm hơn. Ban lãnh đạo kỳ vọng dòng tiền sẽ cải thiện so với quý trước trong quý 4.

Rủi ro và các yếu tố cần theo dõi

Điều kiện tại Trung Đông trở nên tồi tệ hơn vào cuối quý 3 và tiếp tục trong tháng 10. Khu vực này đã làm giảm khoảng 40 triệu USD doanh thu quý 3 do việc tiếp cận công trường và nghiệm thu thiết bị ảnh hưởng đến hoạt động giao hàng và dịch vụ. Ban lãnh đạo dự báo áp lực sẽ tiếp diễn trong quý 4 nhưng cho biết tỷ lệ hủy đơn hàng vẫn ở mức không đáng kể.

Một số dự án đường ống ở Trung Đông đã dời sang năm 2027. Flowserve tin rằng khối lượng công việc sửa chữa và tái thiết tiềm năng hiện vượt mức ước tính khoảng 50 triệu USD trước đó, mặc dù thời điểm phụ thuộc vào sự sẵn sàng của khách hàng, khả năng tiếp cận công trường và điều kiện khu vực. Các dự án gia tăng tính chống chịu liên quan đến đường ống và kho chứa vẫn là cơ hội tiềm năng chứ chưa phải là đơn hàng đã cam kết.

Tỷ lệ hoạt động cao tại các nhà máy lọc dầu Bắc Mỹ đã khiến khách hàng hoãn lại một số hoạt động bảo dưỡng không thiết yếu và đại tu. Ban lãnh đạo dự báo tình trạng này có thể kéo dài hết quý 4 và sang quý 1, mặc dù nhu cầu sửa chữa khẩn cấp và thay thế vẫn ở mức tích cực.

Theo ban lãnh đạo, lạm phát cho đến nay vẫn ở mức khiêm tốn. Flowserve đã sử dụng sự linh hoạt trong cung ứng, các biện pháp mua sắm và các điều khoản hợp đồng để bù đắp chi phí tăng cao, nhưng cho biết họ sẵn sàng điều chỉnh giá nếu lạm phát tăng tốc.

Điểm nổi bật trong phiên Hỏi & Đáp với chuyên gia phân tích

Ban lãnh đạo cho biết các sáng kiến thương mại—bao gồm báo giá nhanh hơn, quản lý tài khoản khách hàng mạnh mẽ hơn và theo dõi cơ hội tốt hơn—đang nâng cao tỷ lệ trúng thầu và khả năng khai thác dịch vụ hậu mãi trên quy mô thiết bị đã lắp đặt của Flowserve. Công ty kỳ vọng tăng trưởng dịch vụ hậu mãi có thể duy trì trên mục tiêu tăng trưởng đơn đặt hàng hữu cơ chung ở mức giữa một chữ số.

Mức đơn hàng tồn đọng kỷ lục 3,5 tỷ USD củng cố sự tự tin của ban lãnh đạo vào đà tăng trưởng doanh thu năm 2027. Khoảng 75%-76% đơn hàng tồn đọng dự kiến sẽ được chuyển đổi trong vòng 12 tháng khi bước vào năm 2026, giảm so với mức khoảng 90% trong lịch sử do các dự án hạt nhân có tiến độ giao hàng dài hơn. Ban lãnh đạo không kỳ vọng có sự thay đổi lớn trong lộ trình chuyển đổi này khi bước sang năm 2027.

Flowserve kỳ vọng biên lợi nhuận của FCD sẽ được hưởng lợi theo thời gian từ việc tái cơ cấu mạng lưới cơ sở, các giải pháp 80/20 và hiệu ứng cộng hưởng với Trillium. Mục tiêu dài hạn của ban lãnh đạo là khả năng sinh lời của FCD tiệm cận biên lợi nhuận của FPD, dù chưa đưa ra lộ trình thời gian cụ thể.

Ban lãnh đạo cho biết quá trình tối ưu hóa mạng lưới cơ sở đã tăng tốc khi những cải tiến vận hành và việc đơn giản hóa danh mục giúp giải phóng công suất sản xuất. Công việc đang được chuyển từ các cơ sở có chi phí cao hơn sang các địa điểm có chi phí thấp hơn trong cùng khu vực hoặc bán cầu, hỗ trợ lộ trình hướng tới mục tiêu biên lợi nhuận hoạt động điều chỉnh 20% vào năm 2030 của công ty.

Toàn văn Biên bản Cuộc họp Báo cáo Kết quả Kinh doanh

Toàn văn cuộc gọi công bố kết quả kinh doanh

Phần trình bày của ban lãnh đạo

Operator

Good day, and welcome to the Flowserve Third Quarter 2026 Earnings Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Olivia Webb, Director of Investor Relations for Flowserve. Please go ahead.

Olivia Webb

Thank you, and good morning, everyone. Welcome to Flowserve's Third Quarter 2026 Business Update. I'm joined by Scott Rowe, Flowserve's President and Chief Executive Officer; and Flowserve's Chief Financial Officer, Brian Ezzell. Following Scott and Brian's prepared remarks, we will open the call for questions.

Turning to Slide 2. Our discussion will contain forward-looking statements that are based upon information available as of today. Actual results may differ materially due to risks and uncertainties. Please refer to additional information, including our note on non-GAAP measures in our press release, earnings presentation and SEC filings, which are available on our website.

With that, I will turn it over to Scott.

Robert Rowe

Thank you, Olivia, and good morning, everyone. To start, I'm excited to have Brian Ezzell on our executive leadership team in his new role as Chief Financial Officer. He brings deep financial and operational experience, strong knowledge of our business and trusted relationships with the investment community. Since Brian stepped into the CFO role, we have already had the opportunity to visit a number of our teams around the world, and I look forward to working closely with him to advance our financial objectives and continue creating value for shareholders.

Turning to Slide 3. We delivered exceptionally strong bookings and continued margin expansion, earnings growth and healthy cash flow in the third quarter, building on our first half performance. These results reflect the disciplined execution of our associates worldwide through the Flowserve Business System and solid demand across our end markets despite the ongoing headwinds from the Middle East.

Bookings grew 14% year-over-year to $1.4 billion, with strong growth in both aftermarket and original equipment. Adjusted operating margin expanded 170 basis points to 16.5% and adjusted earnings per share grew 19% to $1.07 versus the prior year period. Sales of $1.24 billion were in line with our expectations.

Reported sales were up 5% and organic sales were down approximately 1%, reflecting the continued impact of the Middle East conflict, along with our 80/20 portfolio actions. Our teams around the world remain focused on serving our customers, executing with discipline, reducing complexity and delivering consistent financial results. With 3 quarters behind us, we are updating our full year guidance, including revising our sales outlook due to the increasingly challenging operating environment in the Middle East and raising the low end of our adjusted EPS guidance range to reflect strong year-to-date performance and confidence in fourth quarter earnings.

Let's turn to third quarter bookings on Slide 4. Our book-to-bill was 1.12x for the quarter, with total bookings up 14% on a reported basis and 8% organically versus the prior year period. Aftermarket bookings increased 11% year-over-year to $728 million, marking our fifth consecutive quarter above $650 million and our first above $700 million.

Our expansive installed base, quick response center network and local service capabilities continue to differentiate us. While customer utilization, maintenance activity and order timing can influence quarterly demand, faster quoting, better account planning and disciplined opportunity management help our teams deepen customer relationships and capture more work across our installed base.

Original equipment bookings grew 17% to $656 million, reflecting strength in power and nuclear and solid project activity across end markets, including one larger award in the energy end market. Healthy end market demand and the commercial discipline of the Flowserve Business System are driving bookings growth. We remain focused on opportunities that play to our strengths, offer attractive margins and create long-term aftermarket potential.

As we continue to mature our commercial excellence initiatives, we are beginning to see improvements in order win rates and automated lead-generation conversions. Over time, we believe improved selling capabilities, and more focused product offering and an optimized product cost structure create opportunities to continue accelerating growth. We ended the quarter with record backlog of $3.5 billion, up 4% sequentially and 20% versus the prior year period.

Moving to Slide 5. In Energy, bookings grew 40% in the quarter and 25% year-to-date, supported by global project awards, including a refinery upgrade in the Middle East and further bookings on a large LNG project in Canada. Utilization rates remained elevated at large process facilities around the world, most notably in North America as the Middle East conflict influenced activity beyond the region.

We are now seeing more customers deferring noncritical maintenance and larger turnarounds impacting our book-to-ship activity, which we have largely anticipated given the significantly higher utilization rates. Separately, we are seeing increased energy investment in other countries as customers prioritize energy security within their region.

Energy market fundamentals support continued investment in reliable infrastructure and efficient operations. Our long-standing energy leadership and customer relations position Flowserve to capture opportunities across refining, LNG, pipelines, storage and aftermarket services as energy security investment grows. Power bookings grew 23% in the quarter and 12% year-to-date, supported by nuclear and traditional power generation, including benefits from the Trillium acquisition.

Nuclear bookings were over $115 million, driven primarily by life extension project awards in the United States. Demand across existing reactors, life extension programs and new builds remains encouraging, and our product portfolio positions us well to support growing global power needs. We continue to believe that nuclear power will play a large role in the overall energy mix around the globe.

As we've shared in the past, anticipating the exact timing of nuclear approvals and related bookings is difficult, but we're working closely with our customers and our teams are prepared to support this exciting opportunity. General industries activity remains strong. However, due to a difficult comparison with the prior year, bookings declined 8% in the quarter and 1% year-to-date. Within general industries, pharmaceuticals, water and mining grew in the quarter, and we continue to see growth opportunities across these sectors.

We believe increased investment in pharmaceuticals has the potential to represent a meaningful opportunity over time, supported by our unique product offering and strong engineering capabilities. We also see emerging opportunities in data center cooling as larger systems and the shift towards liquid cooling increased heat management demands, creating a potential role for Flowserve's Flow Control technology, global scale and ability to deliver reliability throughout the life cycle of the data center.

Typical bookings were roughly flat in the quarter and grew 3% year-to-date, consistent with our expectations. While activity remains measured, the market has remained largely stable. The overall picture across the industrial landscape and specifically for critical infrastructure solutions is encouraging with healthy fundamentals across our end markets.

Our forward project funnel expanded during the quarter, while underlying conditions continue to support global aftermarket growth, positioning us to deliver mid-single-digit organic bookings growth for the full year and reinforcing our confidence in continued progress toward our 2030 financial targets.

Turning to the Middle East on Slide 6. Business conditions became progressively more challenging late in the third quarter and worsened further in October, including in areas where we have a larger proportion of installed base. We continue to monitor developments closely, balancing the support of our customers across the region with the safety of our associates as the top priority. The third quarter sales headwind in the Middle East of roughly $40 million was modestly larger than our expectations. Given recent conflict escalation in the region, we anticipate continued headwinds in the fourth quarter as customer site access and equipment acceptance continue to affect deliveries and run rate product and service work.

We have seen no change in cancellation rates in the region, which remain immaterial. Middle East project activity remains moderately active given the conflict in the region. However, we have seen a few projects in our pipeline that have shifted into 2027. While Middle East rebuild bookings in the quarter were modest, additional damage in the recent weeks leads us to believe the potential incremental rebuild opportunity now exceeds our Q2 estimate of approximately $50 million.

Timing will depend on customer readiness, site access and regional conditions, but we remain optimistic about the opportunity to serve our customers as they restore and repair their assets to full operational status. Separately, we continue to discuss infrastructure resilience and redundancy with customers, including pipelines and storage facilities.

These remain potential projects rather than committed orders, with bookings more likely to occur in 2027. Our established regional presence and customer relationships position us well to support this work. Despite the near-term challenges, we believe the underlying need for critical infrastructure maintenance, reliability and investment remains intact.

Our regional footprint, long-standing customer relationships and extensive installed base position Flowserve well to navigate this disruption while continuing to support customers' evolving infrastructure needs.

Turning to Slide 7. The Flowserve Business System continues to strengthen execution, accountability and earnings power. Our progress puts us on track for roughly 16% adjusted operating margin this year as we advance toward our 20% target for 2030. Our progress in portfolio excellence is a clear example of this transformation.

Now in the third year of our 80/20 work, we continue to simplify the business and focus resources on our strongest products and best customers. We believe the 80/20 program can deliver at least 2 more years of margin improvement. We are applying the same discipline to Trillium with the 80/20 quadrant analysis now completed and implementation of actions underway.

Overall, Trillium is performing in line with our expectations, and we anticipate margin improvements moving into next year as portfolio actions, further complexity reduction and integration synergies take hold. Portfolio simplification and manufacturing productivity improvements are enabling us to accelerate further roofline consolidation.

Several actions are underway, including moving work from higher cost locations to lower cost sites within the same region or hemisphere. Over time, we believe footprint optimization has the potential to deliver meaningful cost savings and efficiency gains, making it a key driver of margin expansion toward our 2030 target.

Looking ahead to 2027, a larger backlog, strong project funnel and continued execution of Flowserve Business System position us well for further progress. While uncertainty in the Middle East may influence the timing of customer activity, we remain confident in the underlying demand environment and our ability to drive profitable growth, expand margins and advance toward our 2030 financial objectives.

I'm proud of our associates for their resilience, flexibility and disciplined execution of the Flowserve Business System, which continues to create value for customers and shareholders and reinforces my confidence in delivering our long-term objectives.

With that, I'll turn the call over to Brian to walk through our financial results and outlook in more detail.

Brian Ezzell

Thank you, Scott, and good morning, everyone. It's an honor to be joining you today in my new role as CFO. Flowserve has a tremendous foundation to build upon and significant momentum toward our longer-term growth and margin expansion goals.

I'm excited to be partnering with Scott and the broader team to accelerate growth and our operational progress while maintaining the financial discipline that supports our strategy. With that, let's turn to Slide 8.

Our third quarter results reflect continued execution and progress on our financial objectives. Sales of $1.24 billion were in line with our expectations. Reported sales increased 5% versus the third quarter of 2025, and organic sales were down 1%. Aftermarket sales grew 12%, while original equipment sales declined 2%, reflecting the timing of our growing backlog converting sales.

Walking through the year-over-year sales bridge, underlying growth of approximately 3 percentage points was offset by approximately 3 percentage points from Middle East disruption and approximately 1 point from our 80/20 portfolio actions, resulting in an organic sales decline of 1%.

Acquisitions and divestitures, including Trillium, added 670 basis points, while foreign exchange was roughly neutral, bringing reported sales growth to 5%. We ended the quarter with backlog of $3.5 billion, the largest in Flowserve's history, up 20% year-over-year and 4% sequentially. Adjusted gross margin expanded 190 basis points to 36.7%.

Adjusted operating margin expanded 170 basis points year-over-year and 120 basis points sequentially to 16.5%, outpacing our expectations and reflecting positive incremental margins on an organic basis. Aftermarket mix, 80/20 benefits and operational execution drove the improvement, partially offset by higher SG&A. Adjusted earnings per share grew 19% to $1.07, ahead of our expectations coming into the quarter.

Turning to Slide 9. Both segments continue to execute well and advance our full year priorities. FPD bookings grew 15% to $940 million versus the prior year period, up 11% organically, driven by energy and power projects and strong aftermarket demand across our installed base.

Sales increased 4% to $830 million, down 1% organically, reflecting softer Middle East book and ship work and the timing of our growing original equipment backlog converting to revenue. Adjusted gross margin expanded 220 basis points to 38.1% and adjusted operating income grew 15% to $181 million.

Adjusted operating margin expanded 220 basis points to 21.8%, driven by mix benefits, 80/20 actions and improved project execution. Moving to FCD. Bookings grew 13% to $446 million versus the prior year period, up 1% organically. Sales increased 9% to $412 million, down 1% organically, reflecting softer Middle East book and ship work and anticipated 80/20 headwinds.

Adjusted gross margin increased 110 basis points to 33.2% and adjusted operating income grew 9% to $67 million. Adjusted operating margin was flat year-over-year at 16.3%, with lower Middle East run rate volumes and to a lesser extent, the addition of pre-synergized Trillium weighing on the results. We expect the modest margin headwinds in Trillium to improve as we fully integrate and execute our 80/20 actions.

Moving to Slide 10. We generated $144 million of operating cash flow in the third quarter, driven by strong earnings performance, partially offset by higher working capital in the Middle East and a modest use of cash for our accelerated footprint realignment. Free cash flow was $127 million in the quarter, representing a 92% conversion of adjusted net earnings.

Given working capital headwinds from delayed Middle East shipments and modestly slower collections, we now anticipate full year 2026 free cash flow conversion of approximately 80% of adjusted net earnings. We expect fourth quarter cash flow to improve sequentially, reflecting our typical seasonal patterns. Our balance sheet remains very healthy with adjusted net leverage of 1.5x, providing flexibility to invest in the business and execute our capital allocation framework.

We returned $78 million to shareholders in the third quarter, including $28 million of dividends and $50 million of share repurchases, bringing year-to-date repurchases to $75 million. Our Board of Directors also recently approved increasing our share repurchase authorization to $500 million, reinforcing our commitment to creating long-term shareholder value.

We continue to view share repurchases as an attractive use of cash when we see dislocation between our share price and our view of the company's intrinsic value.

Turning to full year outlook on Slide 11. Exceptional bookings growth is expanding our backlog and strengthening confidence in future revenue growth. However, as Scott summarized earlier, dynamics in the Middle East became more challenging later in the quarter with October continuing to see further disruption in the region. We are updating our outlook to reflect the recent changes and additional uncertainty in the Middle East environment.

We now anticipate full year organic sales to decline 1.5% to 2.5% (sic) [ 2.5% to 1.5% ]. This outlook reflects lower book and ship activity in the Middle East as well as some modest impact to our global aftermarket book and ship activity as process industries operate at full utilization rates. Total sales are now expected to grow 2% to 3% for the full year, reflecting the revised organic sales outlook and modestly higher contribution from acquisitions, which have performed better than originally anticipated during integration.

Given the overdelivery margin in the third quarter as well as the strong execution trends from our teams around the globe, we are raising the low end of our EPS range and now anticipate full year EPS to range from $4.10 to $4.20. At the midpoint, this represents 14% EPS growth and assumes roughly 150 basis points of margin expansion versus last year.

For the fourth quarter, we expect organic sales growth in the mid-single digits and total sales growth in the low double digits, driven by backlog conversion, continued aftermarket strength, a sequentially smaller headwind from our 80/20 actions and the benefit of Trillium, partially offset by lower Middle East book and ship activity. Fourth quarter adjusted operating margin is expected to expand sequentially from the third quarter, driven by volume leverage, mix, ongoing benefits from the Flowserve Business System and the realization of certain Trillium integration synergies.

In closing, our third quarter bookings growth, margin expansion and higher adjusted earnings per share reflect continued execution. Our year-to-date performance and strong project pipeline give us confidence entering the final quarter as we continue to manage uncertainty in the Middle East. We remain focused on disciplined execution through the Flowserve Business System, cash generation, delivering on our commitments and advancing toward our 2030 financial targets.

With that, operator, please open the line for questions.

Operator

[Operator Instructions] We will take our first question from Mike Halloran with Baird.

Phần hỏi đáp

Michael Halloran

So could you [ just talk ] on trends a little bit here. So maybe strength of funnel, what the quoting activity looks like, how you think that conversion of the funnel is going to track? Obviously, some delays in the Middle East, but it sounds like the activity or the potential there is a little higher today. But not just Middle East, maybe, kind of, a broad thought process on how that's tracking.

Robert Rowe

Sure. Yes. Maybe we'll just start with the quarter. We're super excited about the bookings. Obviously, a $1.38 billion number is a big number for us with record aftermarket bookings. And so as we think forward, right, I mean, that's a big number. I don't want to say we're going to deliver that every quarter.

But I would say, generally speaking, we feel constructive about the forward look on both projects and aftermarket. And maybe, kind of, I'll break that down a little bit. First, I'll start with commercial excellence, right? We've been leaning in on commercial excellence for over a year now, very much focusing on account management, order tracking, pursuits, conversion rates, like all of that good stuff.

And I think some of that work is now coming to fruition, and so we're excited about that. On the aftermarket side, it's really about winning and capturing the work from our installed base, and the teams have done an incredible job with that. And so we fully expect we can continue to grow aftermarket at a healthy clip, even higher than our mid-single-digit growth rate target on an overall basis.

And then maybe on the end markets and projects, we believe we've got really nice, kind of, sectors that we're working in that have room for growth for at least into 2027, and we believe beyond that. And so when you look at the big markets that we like the most, it's power and nuclear is obviously growing at a really healthy clip.

We're seeing both nuclear and traditional power. The funnel is up. There's lots of work there. We're incredibly well positioned to win our share. Energy security is a team that's working around the globe, and we continue to do good work in orders for that and the funnel is healthy as we think forward.

And then the Middle East, a whole different topic. But at some point, there's a rebuild and a resilient activity and investment in the Middle East. And as you know, we're very well positioned there. And then finally, within general industries, there's some really select growth areas that we believe that we can position the portfolio to grow. And so I think we're leaning into growth, and we feel that we've got the ability to grow the bookings rate and ultimately the revenue here for years to come on the forward look.

Michael Halloran

Helpful. And then maybe understand -- help me understand what the backlog and the strong backlog levels means for next year. I know some of that backlog, particularly [ nuclear ] side is longer dated, but maybe just a sense for the visibility that you have today on '27 and maybe put some of that visibility in historical context and how much visibility you have now versus previous years and any other thoughts you might have there?

Robert Rowe

Sure. Mike, I'll start, and I'll let Brian jump in on this. We'll start with the record backlog of $3.5 billion. And obviously, we feel good about that. It positions us well for revenue growth in 2027. The book-to-bill year-to-date is 1.12x. And so that's another way to get at it. And so as we look at those 2 numbers, it really provides a healthy construct and set up for 2027.

And as you know, at the end of the fourth quarter, we'll provide the guidance like we always do. And so I don't want to get too tight in terms of what that looks like. We've got to deliver the fourth quarter, both on bookings and sales. But I would say right now, we feel really good going into the year.

Brian Ezzell

Yes. Mike, I would just add on the backlog specifically, if you go back in time, our backlog at one point, about 90% of that was converting in the next 12-month period. That percentage has moved a bit lower over the last couple of years, really with more nuclear work in the mix. And so I think we came into 2026 with that number around 75%, 76%.

So we'll see where we land going into next year with that percentage. I don't expect a major movement. There will be some elongation for nuclear as we add larger projects. The rest of our project work that we're seeing right now -- so the bigger projects in the quarter is not really elongated. So it's, kind of, typical project work, nothing unusual there. And then obviously, the backlog that is related to aftermarket turns relatively quickly. And so we should be relatively balanced year-over-year in terms of backlog conversion.

Operator

We will take our next question from Andy Kaplowitz with Citigroup.

Andrew Kaplowitz

Scott, maybe just focusing a little more on the aftermarket bookings. I think you're recording that, kind of, growth without a ton of refinery turnaround. So maybe you could give us more color into what's driving the aftermarket strength. I think you talked about improving capture rates. So where are you in terms of your own initiatives in capturing your installed base? And where could you go in '27 and beyond?

Robert Rowe

Yes. Yes. The aftermarket is really performing at a high level, record bookings in the quarter at over $700 million. And I just want to say the team is working hard. They're leaning in and they're supporting our customers with their needs and repairing work, providing spare parts and doing the service that's needed. And so again, I'll, kind of, point back to commercial excellence as we look at account management, understanding where the installed base is and really then focusing on speed, right, speed to quote, speed to deliver responsiveness within that whole cycle, the more we do that and the better partnership we have with the customers, the higher the capture rate moves.

And so we've been excited about what we've been able to do there over the last 2 to 3 years, and we feel very confident in our ability to continue to move capture rate up. I'll also say there's a weird dynamic going on right now, and it's mostly North America. And so we'll just use North America refinery, but it's a couple of other industries as well. But we've got incredibly high utilization rates on the back of high profitability.

And so what we're seeing is a little bit of a slowdown on parts and services, but we are seeing replacement activity at a very high level, which is still converting to really healthy bookings. And so they are delaying some spending around the maintenance programs. And we believe in 2027 that, that delay can't last a whole lot longer. And so we feel that 2027 should be a really nice year for growth as we look into that year with our customers and particularly on the North America refining side.

Andrew Kaplowitz

That's helpful. And then just focusing on margin for a second. You ended up recording good sequential incremental margin in Q3 in FCD, despite Middle East weakness. I'm sure there's inflation out there for you. So how do you think about the puts and takes of FCD margins as you go into '27? You mentioned footprint consolidations. I assume that's going to start helping you a little bit more. So does FCD start to close the gap on obviously, good FPD performance?

Brian Ezzell

Yes, I'll jump in, Andy. So I'd say when we look at the quarter, it was good performance for FCD, and that team continues to make progress on our longer-term goals. I'd say when you look at the third quarter, the Middle East was a drag, which you mentioned, that's roughly 100 basis points of headwind in the quarter to FCD. And so the team continues to make progress despite the impacts we're seeing there and when the conflict in the Middle East evolves and changes, and then we'd expect that to create some tailwinds.

I would say as we look into fourth quarter and then into next year, we continue to make progress. We do expect footprints and the actions we've taken will begin to drive some enhancements to the margin structure. Trillium as well. There's some synergies that are coming through on the business as we integrate. And so that will provide some tailwinds.

I think a little early to provide too much in terms of specifics, but we are making progress. And I think structurally, we believe this business over time will be around the FPD margin. So the work is underway to get us there in terms of the Flowserve Business System with our 80/20 efforts and operational excellence, but we're making good progress and on track to deliver on our longer-term goals.

Operator

We will take our next question from Nathan Jones with Stifel.

Adam Farley

This is Adam Farley on for Nathan. Maybe we can drill a little bit more into the energy orders in the quarter. Maybe just talk a bit about the impact from the large project you won and then maybe [ extra ] large project, just the health of the underlying market within energy.

Robert Rowe

Yes. I would say there's a generally healthy project environment in the quarter. We had one large project in energy that was greater than $50 million. Outside of that, though, it was small-to-midsized projects. So what I'd say, kind of, our normal project look. And so if you exclude the $50 million order, it was still a really healthy OE for us.

And so I would not say that the results were dependent on 1 or 2 large orders. We had one really large order that we're proud of and we're excited about. But the underlying health of the market was solid. And then just kind of -- I said this in the first question, but as we look forward, the project funnel is still healthy. I think the Middle East timing is -- there's projects in there that are definitely at risk to moving out just given some of the dynamics in the region. But overall, I think we still are constructive about what projects can do for us on the forward look.

Adam Farley

All right. That's helpful. And then switching gears maybe to FPD margins continues to perform very strongly. Maybe just talk about the sustainability of the margin profile within FPD? And how should we think about incremental margins on growth within the segment?

Brian Ezzell

Yes, happy to. We feel really good about what the FPD team has delivered. They continue to make progress in the margin structure, and we see room ahead. I would say in the quarter, really favorable in terms of 80/20 benefits, project execution. There was a little bit of mix favorability in the quarter, and that tends to ebb and flow quarter-to-quarter.

So we see that move around 30 to 50 basis points quarter to quarter. But underlying margins really, really healthy and strong, and we believe very durable. And that speaks to a couple of components, the Flowserve Business System delivering. I would say the aftermarket business is really strong in FPD, and that brings with it improved margin profile.

And then on the OE and project side, the teams continue to execute very well. And so we're delivering projects on time or even a little bit better than expectations that we have going into project work. As we look forward, there are actions that the team continues to take and believe that we can expand margins from here. I would say on the FPD side, obviously, margins are, kind of, in the range of our peer set. And so we feel really good about where we stand. And really, that team is more focused on growth over time. Now again, we'll continue to push on margin opportunities and enhancements, but I would say more of a pivot to how do we accelerate growth in that business.

Operator

We will take the next question from Joe Ritchie with Goldman Sachs.

Joseph Ritchie

Brian, congratulations on the new role. So I'm just curious on the Middle East and how you see this playing out. Obviously, like a lot of uncertainty in the region. We're estimating that the headwind this year is going to be north of $0.10 at least. How -- if things stabilize in the region, like, how does that potential headwind this year turn into a tailwind next year? And is there any risk of, like, project cancellation? Just any color you can provide on like what's going on, on the ground and the impact that you're seeing this year? It would be helpful.

Robert Rowe

Yes. Joe, that's a difficult question because you're asking me to predict peace in the Middle East. Here's what I would say. A couple of things is just grounding for everyone. We've got an incredible presence in the Middle East. We've got good customers. We work very closely with them, and we're trying to do everything we can to, number one, keep our people safe and out of harm's way; and then two, support our customers in the best way possible.

And what I would say is in September and October, that got increasingly challenged as hostilities, kind of, moved and escalated in certain parts of the world that -- or certain parts of the Middle East where we have a very strong presence and strong operations. And so it is incredibly dynamic. It's difficult to predict what will happen next. There's lots of rhetoric out there around our midterm elections and what could happen.

And it's just difficult to say what this looks like. What I will say is, hypothetically, we don't necessarily need a peace in the Middle East for our business to start growing. What we need is some form of ceasefire and hostilities to settle down. When and if that happens, we're positioned incredibly well to do a couple of things.

And so one is the repair work. And we put a number out in the second quarter of $50 million. Given the events over the last couple of weeks, that number is now higher. And so we know that there's more damage at sites that have our installed base and equipment in. And so we believe that number is higher. We don't know exactly what that is until we can get to some of those sites and understand what the repair work and cycle looks like.

But that equipment will get replaced or repaired. And so we feel comfortable that, that comes through. And my guess would be that, that's somewhere in 2027. And then the other piece is there will be a, kind of, a resilience and redundancy. And a lot of our customers are talking about how do they do things a little bit differently to provide a redundant pipeline or incremental storage or just having resiliency in their network and their operations that allows them to continue to produce and export given some of the potential hostilities.

And so there are some very ambitious plans there. We don't know what the timing looks like. And again, hostilities will need to settle down for that to take effect. And then maybe the third lens is just the normal operations. And so the normal operations are the refineries and chemical plants and other various facilities, typically, would run at an 85%-plus utilization rate. They're not running anywhere near that right now.

At some point, those start to walk up. And when they do, our maintenance business with parts and services and replacement starts to pick up in a healthy way. And so we feel really good about the long term, I would say, even the midterm and the long-term outlook in the Middle East, it's just the short term is really, really difficult to predict given what's happening in the region.

Joseph Ritchie

Yes. Super helpful answer, Scott. And then just maybe my second question here. Look, the orders were strong across the board. It was interesting, though, that like -- and this is not to nit, but like the general industry's bookings were down 8% in the third quarter. We're seeing several industrial peers continuing to report improving short-cycle demand. So I'm just trying to understand what's going on in that business? Was it just some project timing? Are you seeing maybe some broader like underlying demand weakness? Just any comments around that would be helpful.

Robert Rowe

Yes, sure. Yes, 8% down in the quarter was really on the back of a difficult comp last year where we had a big number. I think looking at the year-to-date number, we're still down 1%. But with that said, we're pretty excited about the industries that we're playing in, in the general industry space. And so water has been active for us. Mining has been reasonably healthy. Pharmaceuticals continues to grow.

And then I just -- I would also add, there's other industries there that we believe that we can continue to push -- position our products and make a strong effort to continue to diversify our bookings and move into spaces that we find attractive over multiple years. And so we feel good about the outlook in general industries. I think the quarter comp was just a difficult one. And then maybe just lastly, if you look Q2 bookings from a dollar basis, Q2 to Q3 expanded pretty nicely. And so we saw a growth sequentially, but the year-over-year comp was difficult.

Operator

[Operator Instructions] We will take our next question from Brett Linzey with Mizuho.

Brett Linzey

I wanted to come back to the data center comment. You talked about the life cycle opportunity. Maybe a finer point here. Is there any way to size the Flowserve potential wallet there in data center? Was it more just on a second derivative impact in gas plants operating at these high duty cycles? Yes, anything you can discuss on some of the traction there?

Robert Rowe

Sure. Yes. I would say, I'll start with the power side, right? We are seeing incremental demand on traditional and nuclear power, and we play in both. And so I think that's -- data centers has been a large part of the incremental demand on power. And again, we've got products that are well positioned in that space, and we're seeing the uplift already.

And then on data centers themselves, I would say this is an emerging opportunity for Flowserve. We've historically been involved in this space, but at a very small level. And maybe the trends here that we're seeing will help think about what the potential is for Flowserve. But historically, the data centers have been HVAC or air cooled. And now data centers as they're getting significantly larger with much more thermal management requirements and a much larger scale, you can imagine that they're moving more toward liquid cooling.

And as that happens, then Flowserve has a right to play here. And with this scale and with the international nature of this, the manufacturing capability and then just the ability to provide a quality product that's reliable through the life cycle of a data center, these are areas where Flowserve has a lot of strength. And so I'd say, we're too early to size our opportunity, but we're having different conversations than we ever had in this space. And so I think that maybe the easiest way to say this is if data centers continue to grow and expand and get larger, then Flowserve will most likely be a part of this market on a go-forward basis.

Brett Linzey

And then just a follow-up on refining. So you had some pull-in on emergency repair, but some delays on maintenance across North America, not a surprise there. Could you just size the revenue that got pushed out on maintenance in Q3 and the expectation for Q4? Just trying to think about what might get caught up into next year.

Robert Rowe

Yes. I don't think we're going to provide an exact number. It's actually hard for us to calculate. And maybe again, the 2 things that have happened. So the emergency work is higher, right? So customers need the work, and we're there and we're supporting on a very quick basis. The other thing we've seen is replacements. And so longer cycle replacements. So I think they want a new pump or a new valve versus a part or a service. And so we have had healthy demand for those replacement items.

But what we're seeing is what I'd call that normal, kind of, MRO parts service and smaller replacements has absolutely slowed down given the utilization. And again, I think maybe the important point here is utilization rates remain high. We think this will continue maybe through the fourth quarter into the first quarter. But at some point, operators, and again, particularly North America refining, have got to spend money to keep these assets up and running. And so we feel pretty good that you're going to see an uplift in 2027 across the board on the aftermarket and maintenance spending at the refining sites.

Operator

We will take our next question from Joe Giordano with TD Cowen.

Joseph Giordano

So you talked about roofline consolidation and footprint optimization and stuff. I feel like we've been talking about that even before you even got to the company. So...

Robert Rowe

We did, Joe. We had a big program before I got there.

Joseph Giordano

Do you want to, kind of, catch us up on -- like from an outsider standpoint is not, like, what's actually happening here? How far have we gone? I mean when we talk about something for like a decade, it's hard to think about how we're accelerating it. So like maybe catch us up on where we actually stand there.

Robert Rowe

Yes. No, it's a really good point, and we probably need to do a good job laying out what the prize is here and what we've done historically. And as you remember, before I got here, so pre-2017, there was a massive -- I think there was a public name on this, a realignment program, and we had a lot of dollars and a lot of savings. And maybe what I just would start with is the landscape at Flowserve from a manufacturing footprint standpoint is very vast.

And you had 2 companies come together almost 30 years ago now that didn't do a whole lot of roofline consolidation. And so I would say a lot of our manufacturing is suboptimal in terms of size. And we put different initiatives over different periods of time to drive that consolidation. The other thing, I would say, is closing manufacturing sites and moving them to other locations is very difficult.

And if you do that with immature process or unclean data, you have significant problems. And so when I got here, we slowed down that program significantly. In the last 3 years, when we launched the Flowserve Business System and operational excellence, we've slowly began to get serious about the roofline consolidation. And so we haven't talked about it a whole lot, but quietly over the last couple of years, we've done 1, maybe 2 a year at larger sites.

And we believe there's still a significant prize to move this initiative forward. And so on the back of operational excellence and portfolio excellence, we've got, kind of, 2 levers that are freeing up capacity, right? So the operational excellence is just driving productivity within our sites and improving how we operate and manufacture and work the supply chain.

And then the portfolio excellence is driving complexity out of our offering, which is also freeing up capacity within the manufacturing. And so with those 2 levers now fully in motion and moving rapidly, we are now seeing even a bigger prize on the roofline side. And so again, we'll provide more details as we go forward, but we think this is a meaningful opportunity for us to continue the margin progression and advance towards our 2030 targets.

Joseph Giordano

And I'm honestly surprised we haven't really talked inflation on this call much. Steel prices are high, diesel freight costs are high. You guys make heavy things. Can you just -- what are you seeing here? How are you offsetting it? Like, what's the -- are you able to reprice and get adjustments from customers to offset here?

Brian Ezzell

Yes, Joe, let me jump in. So we have seen a little bit of modest inflation. I would say our teams are working hard to make sure we offset that, and I'll give a little bit of color there. So one, our supply chain and procurement teams have become much more advanced in this space. And so we have good visibility to what's happening real time or very near real time, and we're able to move things around our supply chain and be flexible. And that allows us some ability to offset cost increases we might see in a particular geography.

In addition, we do take a proactive approach in our project work, in particular, to make sure we've got contract terms that allow some flexibility on the price side. We also order in timely fashion. So we try to match up orders with the work and make sure that we don't have risk in terms of exposure. And then obviously, where we need to and we need to talk price, we're flexible.

We've shown an ability to do that, certainly, last year with tariffs where we responded with price. And so we're looking to -- certainly are able to do that where we need to. I'd say, thus far, the total impact has been relatively modest, and we've been able to offset through our own supply chain actions and sourcing options. As we get into later this year and next year, if price inflation starts to move on us, then we're prepared to take other actions. But thus far, we've been able to manage it within the overall portfolio.

Robert Rowe

I'll just add. This is certainly a credit to the maturity of the business system. And as you know, we haven't always been good at managing pricing costs and our teams are doing a much better job understanding where inflation is, where our suppliers are, how do we work around that, how do we get the best deals and how do we make sure that in the event that the cost is going up that we're pricing for it accordingly. And so I feel like we're in a good place. We've got to continue to manage it. It is a dynamic environment. It is an inflationary environment. But thus far, year-to-date, we've done a really nice job with this.

Joseph Giordano

Is it fair to say that because the aftermarket has been such a strong driver, like that's helping you in a way because you can price that much more in like real time?

Robert Rowe

Yes. Look, the aftermarket teams have done a really nice job, and the margins are higher there. And so that's certainly a component. But I would say our original equipment teams are doing equally as good. And so we're seeing margin progression across the product families and across our large projects as well. And so I wouldn't say this is just an aftermarket phenomenon.

Operator

We will take our next question from Zachary Walljasper with UBS Securities.

Zachary Walljasper

I just really have one question. Can we go a little deeper on the nuclear awards. So nuclear awards remain solid so far this year. We've seen a number of nuclear awards over the past quarter. Can you just update like what geographies, what type of facilities the team is seeing success so far?

Robert Rowe

Sure. Yes. Nuclear has been a bright spot for us, really all year where we've delivered over $100 million of bookings every single quarter. Third quarter was a really strong quarter. Most of the awards in the third quarter were in the United States, so in North America.

And almost predominantly, those awards were life extension or uprates and outages at the existing reactors. And so again, I think it really provides context to our large installed base delivering orders for multiple years. And so we're excited about what we've been -- what we've done year-to-date in bookings and our ability to support our customers there.

And then we're equally excited about the forward look. And so we still believe that nuclear is going to play a meaningful role in energy worldwide. We still believe there's significant opportunities for Flowserve. I'd say the near-term opportunities will be in Asia and Eastern Europe. The U.S. is still advancing a program. We are optimistic that, that may happen this year, but it seems to be moving out a bit. But overall, we believe the nuclear mix and content will be significantly higher as we project over the next couple of years.

Operator

And there are no further questions at this time. Ladies and gentlemen, this will conclude today's call. We thank you for your participation, and you may now disconnect.