Baird downgraded Flowserve (FLS ) to underperform from outperform.
Analyst Michael Schneider says the shortfall in earnings per share and more importantly, free cash flow, raises concerns that the company could be in jeopardy of violating its debt covenants. This puts earnings estimates and the target under review. Additionally, Schneider notes management said 2003 earnings per share could show only "marginal" improvement without an improvement in end markets. He says with investor anxiety already elevated commensurately with debt levels, he believes the stock will remain in the penalty box for some time to come