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Dover Acquires Solaris, Boosts Laser Technology Offerings

Zacks Equity Research
·4 mins read

Dover Corporation DOV recently acquired Solaris Laser S.A. ("Solaris") in an effort to expand its laser technology offerings for marking and coding solutions business. Based in Europe, Solaris offers advanced fiber, ultraviolet and CO2 laser systems for product marking and coding in various industrial and packaging applications.

Following the buyout, Solaris is now part of Dover’s Markem-Imaje business unit, which is a global producer of product identification and traceability solutions. Solaris has served the marking and coding industry for more than 25 years.

The buyout boosts Markem-Imaje's laser technology product offerings, and reinforces its position in the identification and traceability equipment and solutions market. Moreover, the expansion of product lines will enable Markem-Imaje to fulfill customers’ growing demand for the laser coding technologies. The transaction supports Dover’s commitment to enhance its portfolio with bolt-on acquisitions by boosting shareholders’ value and growth.

Dover has a long tradition of making successful acquisitions in diverse end markets. In 2019, the company acquired three businesses for a total consideration of $216.4 million. The company made these acquisitions to complement and expand its existing operations within the Fueling Solutions and Pumps & Process Solutions segments. Dover has deployed nearly $250 million on accretive acquisitions so far this year and continues to pursue potential buyouts. This January, Dover completed the acquisition of Systech International. The buyout supports Dover’s marking and coding portfolio, as well as boosts its software and service revenues within the Markem-Imaje unit, which is a part of Dover’s Imaging & Identification segment.

The Imaging & Identification segment will keep gaining from strong demand for consumables and fast-moving consumer goods solutions. Dover expects the segment performance to improve in the second half of 2020 on the pick-up in textiles consumable volumes and demand rebound in the digital printing business. However, the segment’s digital textile printing business will be hurt in the current year as apparel markets have been hit hard by the shutdown of Apparel Retail globally.

The company is poised to gain from robust backlog across its segments, growth in biopharma, aerospace & defense, heat exchangers and marking & coding business in the current year. In addition, the company is likely to gain from product digitization, e-commerce, new product development and inorganic investment in core business platforms. Dover has initiated several growth and productivity capital projects, and aims to invest in can-forming and heat-exchanger businesses to capture growing volumes and upgrade competitive capabilities.

Moreover, Dover’s productivity and cost-reduction initiatives are likely to boost its margins and is expected to exceed the margin conversion target of 25-30% for 2020. The company has executed restructuring programs to better align costs and operations with the current market conditions through targeted facility consolidations, headcount reduction and other measures, which will aid its margins in second half of the current year.

Nevertheless, the demand situation across the company’s business remains uncertain. Even though activity across most markets is improving, it remains below the pre-pandemic levels. Dover has re-initiated the current-year guidance on solid year-to-date margin performance and expectations of a possible improvement in demand during the September-end quarter. The company now expects adjusted earnings per share (EPS) between $5.00 and $5.25, suggesting a year-over-year decline of 11.7% at the mid-point.

Price Performance

Dover’s shares have gained 24% over the past year, outperforming the industry’s growth of 12.3%.

Zacks Rank & Stocks to Consider

Dover currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the Industrial Products sector include Silgan Holdings, Inc. SLGN, IIVI Incorporated IIVI and SiteOne Landscape Supply, Inc. SITE. While Silgan and IIVI sport a Zacks Rank #1 (Strong Buy), SiteOne carries a Zacks Rank #2 (Buy), currently. You can see the complete list of today’s Zacks #1 Rank stocks here.

Silgan has a projected earnings growth rate of 28.7% for 2020. The company’s shares have gained 22% so far this year.

IIVI has an estimated earnings growth rate of 29% for the ongoing year. The company’s shares have rallied 37% in the past year.

SiteOne Landscape has an expected earnings growth rate of 15.4% for the current year. The stock has appreciated 41% year to date.

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