Baron Small Cap Fund: SunPower and Flowserve Will See Earnings Double

Smallcaps SunPower (SPWR) and Flowserve (FLS) will likely see earnings double this year, according to Baron Funds, in their latest quarterly report. Intuitive Surgical (ISRG), another stock that contributed significantly to the Fund's performance in 2007, will see earnings grow 85% for the year, Baron added. The following is an extract from Baron Small Cap Fund's report:

* SunPower: Alternative energy plays captured the market’s imagination with the spike in oil prices and SunPower established itself as one of the industry leaders in technology and business development. We expect that earnings will nearly double in 2008 and have the chance to grow fivefold off that base over the next five to seven years.

* Intuitive Surgical, maker of robotic surgical systems: We expect earnings to grow 85% for the year, on 60% revenue increase and expanding margins, as the DaVinci has become the standard of care for prostatectomies and gained traction in hysterectomies. New applications and international opportunities compliment the growth expected from continued penetration of the domestic market.

* Flowserve, a leading manufacturer of industrial flow management equipment (pumps, valves and seals): We expect revenues to grow about 25%, and earnings to double as new management has successfully refocused the organization while greatly increasing the profitability of this failed rollup. Flowserve’s bookings have grown over 25%, capitalizing on the strong end markets it serves, particularly in oil and gas development.

Comments

[SchraderTrader]

In terms of Flowserve, what will result from a (hypothetically) very severe recession which sees oil decline to $65-$70/barrel?