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Limited exposure to consumer slowdown

For one thing, they call them “industrial” valves for a reason – and that means there is likely limited exposure to a consumer slowdown. According to the most recent 10K, the company’s customer mix by end market is approximately 43% oil and gas, 23% general industrial, 15% chemical, 13% power generation and 6% water treatment. These are industries with long-term planning needs, many of which are finding themselves behind the curve. I don’t see them slowing their spending any time soon.

This is supported by the pricing power the industry continues to enjoy. Although off the 2007 peak in the double digits, the year/year change in January was still far above the industry’s long-term average and still indicating an overall rising trend.

The pricing power is also flowing through to earnings. Flowserve is set to announce earnings on February 27, but they preannounced in a big positive way at the end of January, which explains most of the stock’s run. Curtiss Wright shares, meanwhile, gained 7% on Tuesday when their earnings beat estimates by $0.09 per share “led by our Flow Control and Metal Treatment segments, which experienced strong organic growth of 23% and 15%, respectively, over the prior year periods.” Crane also walloped estimates when it reported last month.

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