Dover Corp. (DOV) has lowered its earnings guidance for 2012 to a band of $4.70–$4.85 from the prior guidance of $4.80–$5.00. Uncertain conditions in Europe, unfavorable foreign exchange rates and a slightly higher tax rate have been cited as the reasons for the downgrade.
Compared with the prior fiscal year’s earnings of $4.26, Dover’s new guidance reflects annual growth of 10% to 14%, down from the previous expectation of 13% to 17%. The Zacks Consensus Estimate for 2012 is currently pegged at $4.88, above the company’s guided range.
In the first quarter of 2012, Dover reported earnings of $1.05 per share, outperforming the Zacks Consensus Estimate of $1.01 and 19% above the year-ago earnings of 88 cents per share. In fiscal 2011, Dover had reported adjusted earnings of $4.26, lagging the Zacks Consensus Estimate of $4.45 but climbing 26% over 2010.
Dover will release its second quarter results on July 18, 2012. The company cautions that most of the brunt would be borne in the second quarter of 2012. The Zacks Consensus Estimate for the quarter is currently at $1.21, reflecting an annual climb of 11.65%. The company expects strength in the latter half of 2012 in handset, refrigeration & food equipment, and energy markets to offset weakness in a few of its other businesses.
Dover continues its strategy of growing through acquisitions to improve its product offering and complement its organic growth strategy. In 2011, Dover invested about $1.4 billion to acquire nine businesses within its targeted markets of Communication Components, Fluid, Refrigeration & Industrial, Energy, Printing and Identification.
Dover has a significant exposure to the volatile semiconductor and electronics end-markets through its Electronics Technologies platform. Uncertainty in the economy impacting consumer spending may affect the semiconductor market.
Exposure to weak European markets also remains a concern as the region contributed 17% of Dover’s total revenues in fiscal 2011. We thus maintain our Neutral recommendation on Dover. The stock retains a Zacks #4 Rank (short-term Sell recommendation).
Dover Corporation is an industrial conglomerate producing a wide range of specialized industrial products and manufacturing equipment. It operates primarily in the U.S. and has subsidiaries and affiliates in Canada, France, Germany, the Netherlands, Sweden, China and the United Kingdom. Dover caters to a diverse clientele primarily spread across the Americas, Europe and Asia. Dover competes with the likes of Cooper Industries plc (:CBE), Ingersoll-Rand Plc (IR), and Weatherford International Ltd. (WFT).
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