Industrial-Valve Makers May Flow Higher With Prices

Earlier this week, I looked at canners as a possible play on the producer price index (PPI) report prepared monthly by the Bureau of Labor Statistics. I believe that industries that are seeing rising prices may reveal some companies whose revenue will grow or whose margins will improve.

Another industry in which the price increases have been flowing is industrial valves. Although the increases have been flattening somewhat, the 8.3% year-over-year gain in September is still pretty sweet.

As I mentioned last month, some of the industrial-valve makers include Flowserve (FLS - commentary - Cramer's Take), Crane (CR - commentary - Cramer's Take) and Curtiss Wright (CW - commentary - Cramer's Take). Let's see how they are doing.

Year/Year Price Increases for Industrial Valves Industry

According to Flowserve, the PPI indicator is right on the money. Flowserve noted in its latest earnings report that its Flow Control Division's "gross margin of 35.6% for the second quarter of 2007 was substantially higher than the second quarter of 2006, up 140 basis points. This increase was principally due to improved absorption on higher sales, the implementation of various Continuous Improvement Programs and cost reduction initiatives and improved pricing."

With sales up 13%, bookings up 15% and pricing remaining strong it looks like the trends could continue for some time.

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At the time of publication, Trent had no positions in the stocks mentioned, although positions may change at any time.

William A. Trent, CFA, is a freelance equity analyst based in the New York metro area. He has been an equity analyst since 1996 and is co-author of Understanding and Evaluating Prospectuses, Offering Documents, and Proxy Statements. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Trent appreciates your feedback; click here to send him an email.