Flowserve Corp. (NYSE:FLS) Q4 2019 Earnings Conference Call - Final Transcript
Feb 18, 2020 • 11:00 am ET
Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Andrew Kaplowitz from Citi. Please go ahead.
Good morning, guys.
R. Scott Rowe
Jay E. Roueche
Andy, good morning.
So Scott and Jay, good execution this quarter, but I just want to focus on your comments that you still see modest bookings growth in 2020 led by refining, chemical and LNG. How much of that confidence comes from all your self-help initiatives and then, your project pipeline last quarter, I think, was down a little bit. If you continue to drop a little in Q4 given macro uncertainty or did it stabilize at this point?
R. Scott Rowe
Yeah. Sure, Andy. I'll take this one. We are still committed to growth, but obviously the marketplace is remaining highly volatile and certainly, the impact of the coronavirus is not going to help. I'll just kind of hit a couple of things that you talked about. First, the project pipeline, what we're seeing in Q1 is relatively stable from what we saw in Q4, which as you said, was slightly down from a year ago, but it's still incredibly healthy. And so for us, it's more about the ability to win selective projects that are out there. We had a nice project awards in Q4. We've got visibility to project awards in Q1 and that pipeline across the downstream space. LNG is -- we've got a lot of opportunities in the LNG spot and in the midstream spot as well.
And so, we feel really reasonably well about the project side and the project bookings. I'd say the big challenge, the one we faced in the back half of last year is our MRO bookings in that book-to-ship business. And so, that's the one we're watching carefully. It's primarily North America. And I just with the distributor destocking, I expect that to pivot to growth, but that turn to growth is now continuing to move out. I was thinking probably earlier in 2020 a month or two ago. And now, it would be probably more in the second half of 2020.
That's helpful, Scott. And maybe the follow-up would be around margins and the impact of all of what you just talked about. So if I look at 2020, it looks like you have relatively modest margin improvement in 2020 at the midpoint of your range. Maybe you could just talk about the puts and takes you see on that 2020 margin and you have the self-help initiatives a tailwind, maybe price versus cost. You did put a yellow check on your progress towards the 15% to 17% margin goal. So how do we think about that longer-term goals? It's been a little harder in this environment where you've got these mix headwinds and maybe modestly lower growth. Maybe you can talk about that.
R. Scott Rowe
Sure. Let me talk about the 2020 guidance first. And as you alluded to, the challenge here is the headwind mix, right? It's the aftermarket versus the OE and in