Flowserve Shell's Preferred Supplier - Analyst Blog

Flowserve Corporation (FLS) has been picked as the sole source supplier of control valves facilitating upstream and downstream applications for capital projects, maintenance, repair and other services at Royal Dutch Shell (RDS.A).

Flowserve will develop processes and solutions for Shell's capital-intensive projects and production lifecycle applications. The agreement is for five years with an option for another five years.

Over the last several years, emerging markets around the globe have been investing in infrastructure projects. These new projects include power generation plants, water treatment systems and mining. This build-out requires process controls in oil and gas, chemical, and water markets—all of which are Flowserve's core businesses. Moreover, Flowserve is benefiting from older infrastructure that needs to be upgraded to meet environmental standards.

Flowserve has expanded its business across the globe; revenues outside North America at present account for more than 70% of total revenue. This diversification strategy should help mitigate the impact of an economic downturn in any one of the industries or countries that it serves.

Flowserve's business depends on capital investment and maintenance expenditures by customers, which in turn, are impacted by numerous factors, including the state of domestic and global economies, global energy demand, the cyclical nature of their markets, their liquidity and the condition of global credit and capital markets.

Continuing volatility in commodity prices, prolonged credit and capital market disruptions and a general slowing of economic growth might prompt customers to delay or cancel existing orders, which could adversely affect the viability of its backlog and impede its ability to realize revenues on backlog.

Flowserve Corporation is a world leading manufacturer and aftermarket services provider of comprehensive flow control systems. The company was incorporated in the State of New York on May 1, 1912. Flowserve develops and manufactures precision-engineered flow control equipment, such as pumps, valves and seals, for critical service applications that require high reliability.

The company uses its manufacturing platform to offer a broad array of aftermarket equipment services, such as installation, advanced diagnostics, repair and retrofitting. The company uses a footprint of Quick Response Centers (QRCs) around the globe to deliver these aftermarket services. Direct competitor is ITT Corporation (ITT).

We currently have a Neutral recommendation on Flowserve Corporation.

 
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