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Baird reiterates their Outperform rating on Flowserve (NYSE:FLS) and the stock remains a top pick (price target moves to $85 from $74). The firm just completed another round of channel checks among several of Flowserve's competitors and related companies. Following discussions with management and market contacts, they believe that the global process markets remain robust, and current sentiment suggests highrates of growth continue at least through 2008.

Given their increased confidence in the longevity of this infrastructure spending cycle, the firm is raising their 2008 earnings estimate by $0.24 to $4.66 per share (+29% YOY), which now assumes 9.5% organic revenue growth (versus original estimate of6%) and a 130 bps improvement in operating margin to 11.6% (versus original 11.4% estimate).

The upside to estimates stems primarily from higher assumed revenue growth across each of the segments as the firm expects double-digit orders growth to continue throughout 2007 and in turn drive near double-digit revenue growth in 2008.

Additionally, they believe the best is yet to come within both the Pump and Valve divisions. The Pump segment is on the verge of seeing a meaningful acceleration in higher-margin aftermarket work associated with the most recent round of large projects going into service.

Notablecalls: Looks like Baird's 2008 EPS estimate is now the new street high. The firm has been positive on this industrial flow equipment player for quite a while now and rightly so. FLS has been a stellar performer.

I would call this one actionable right here if the chart didn't tell me otherwise. A case where technicals trump the fundamental side. I'd love to buy this one a couple of bucks lower (near the 50 day MA)! One to keep on the radar.

FLS 1-yr chart

FLS

Source: Flowserve Corporation Almost a Buy; Priced a Bit Too High