How did FLS manage to boost gross profit in Q4 2024 despite rising expenses?

Flowserve Corporation (FLS) was able to increase its gross profit in Q4 2024 despite rising expenses due to a combination of factors: 1. **Strategic Pricing and Cost Management**: Flowserve's focus on strategic pricing and cost management helped to mitigate the impact of rising expenses on gross profit. The company's ability to optimize its pricing strategies and control costs effectively allowed it to maintain and even improve its gross margin, which increased by 240 basis points to 31.5% compared to the prior year period. 2. **Strong Aftermarket Activity**: The company's aftermarket activity was a significant contributor to its performance, with bookings of $618 million in aftermarket activity. This segment typically has higher profit margins than the original equipment manufacturing segment, helping to boost overall gross profit. 3. **Efficient Operations and Inventory Optimization**: Flowserve's emphasis on lifecycle services and equipment maintenance likely led to more efficient operations and optimized inventory levels, reducing waste and minimizing costs. This operational efficiency is a key factor in maintaining high gross profit margins. 4. **Increased Operating Income and Cash Flow**: The company reported an increase in operating income and adjusted operating income of 14% and 22%, respectively, compared to the previous year. Strong cash flow, driven by strong earnings and working capital improvements, also supported the company's financial health and ability to invest in growth opportunities. In summary, Flowserve's ability to boost gross profit in Q4 2024 can be attributed to a combination of strategic pricing, cost management, strong aftermarket activity, efficient operations, and increased operating income and cash flow. These factors collectively enabled the company to maintain and enhance its gross profit despite rising expenses.