Earnings Recap — Q2 FY2026
CY Q3 2026 · Reported July 29, 2026 · Beat 5 of last 7 quarters
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Flowserve's strong bookings, particularly in power and nuclear, underscore the accelerating AI-driven electricity demand and the buildout of traditional and nuclear generation capacity. The company's record aftermarket bookings and expanding backlog indicate sustained investment in critical infrastructure, which is a key component of the AI infrastructure ecosystem. The Middle East disruption, while a near-term headwind, could lead to incremental energy security investments that benefit Flowserve's long-term growth.
Flowserve delivered strong Q2 results with bookings up 26% to $1.35B, driven by record aftermarket bookings and a 44% surge in original equipment bookings. Sales declined 2% reported (down 3% organic) to $1.2B, reflecting Middle East disruption and 80/20 actions. Adjusted operating margin expanded 70 bps to 15.3%, and adjusted EPS of $0.95 beat expectations. The company closed the Trillium Valves acquisition on June 30 and completed a small JV buyout in the Middle East. Middle East sales declined ~$60M year-to-date, a 3-point organic headwind, with no change in cancellation rates.
Management modestly lowered full-year organic sales guidance to approximately -1% (from prior range) due to the Middle East conflict, while raising the low end of adjusted EPS guidance to $4.05-$4.20, implying double-digit EPS growth. They expect back-half organic sales growth of ~5%, driven by a larger backlog, abating 80/20 headwinds, and continued aftermarket strength. The Trillium acquisition is expected to be roughly neutral to EPS in 2026 and contribute to back-half reported growth. Management reiterated confidence in mid-single-digit organic bookings growth for the year and remains on track for ~16% adjusted operating margin in 2026, progressing toward the 2030 target of 20%. They also highlighted a robust project funnel and continued nuclear momentum, with nuclear bookings over $110M in the quarter.
“Bookings were a standout in the quarter, growing double digits year-over-year to $1.35 billion, with record bookings of almost $700 million, and adjusted operating margin expanded 70 basis points to 15.3%.”
on Q2 performance
“We have seen no change in cancellation rates in the region, which remains immaterial. But as you can see from the pictures, it has become more challenging to determine exactly when product deliveries may occur.”
on Middle East impact
“We are now in the third year of portfolio excellence, with many of our business units in year 2 of 80/20. We are making thoughtful decisions around the portfolio, including the divestiture of a small product line in valves that we expect to close in Q3.”
on Portfolio actions
Was the energy acceleration mostly the 2 LNG projects or more broad-based? Is general industrial momentum sustainable? Could bookings growth exceed mid-single digits if the Middle East conflict resolves?
Scott Rowe noted record aftermarket bookings and broad-based growth across all end markets. He highlighted 4 large projects (>$20M) including 2 LNG (Middle East and Canada), a large nuclear award in Asia, and another Middle East project. He expressed confidence in mid-single-digit bookings growth for the year, with a healthy project pipeline providing visibility.
How did you land on the $50M rebuild estimate? Do you have a TAM estimate for energy security build-out?
Scott Rowe broke the Middle East opportunity into 4 categories: run rate business (down ~20%), large projects (some slipping to 2027), restoration (~$50M estimate based on site assessments), and redundancy (largest prize, no estimate yet). He noted ongoing customer conversations and Flowserve's strong position to win.
Is the $60M Middle East headwind the right number for the back half? Could you explain the sequential ramp into Q4?
Amy Schwetz confirmed the $60M headwind is the right ZIP code, with the run rate business expected to remain muted. She noted the 80/20 headwind (200 bps) and North American MRO softness will abate in the back half. The Q4 ramp is supported by a 9% backlog increase and historical seasonality.