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Dover (DOV) Appreciates 54% YTD: What's Working in Favor?

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Shares of Dover Corporation DOV have rallied 54.3% year to date, aided by its stellar third-quarter 2019 results and an upbeat outlook for the ongoing year. Also, improved performance in the Engineered Systems and Fluids segments, robust order backlog, strong demand and cost-reduction initiatives are some of its key growth drivers. The company has also outperformed its industry’s rise of 31.1% during the same time frame.


Dover, a Zacks Rank #2 (Buy) stock, has a market cap of roughly $15.9 billion. The company has an expected long-term earnings per share growth rate of 11.5%.

Let’s delve deeper and analyze the reasons behind the company’s impressive price performance and find out if there is room for further appreciation:

Earnings & Revenues Beat Consensus Mark in Q3: Dover reported adjusted earnings per share from continuing operations of $1.60 in the September-end quarter. The figure improved 18% year over year as well as beat the Zacks Consensus Estimate of $1.53. Total revenues in the quarter came in at $1,825 million, indicating year-over year growth of 4.5%. Also, the top-line figure outpaced the Zacks Consensus Estimate of $1,811 million.

Upbeat Outlook:

Dover’s adjusted earnings per share guidance for 2019 is $5.82-$5.85. The mid-point of the guidance suggests 17% year-over-year growth. The guidance reflects solid order backlog across all business segments, productivity and cost initiatives, and execution of margin targets. Robust order backlog, backed by customer wins as well as execution of margin targets, is likely to aid its fourth-quarter performance. Through the balance of this year, the Engineered Systems and Fluids segments’ impressive performance, benefits from cost-containment actions, and footprint-optimization projects and retail refrigeration will help negate the impact of soft demand in the Refrigeration & Food Equipment segment.

Healthy Growth Projections: The Zacks Consensus Estimate for Dover’s current-year earnings is currently pegged at $5.85, reflecting year-over-year growth of 17.7%. The same for 2020 is pinned at $6.32, indicating a year-over-year improvement of 8.12%.

Positive Earnings Surprise History: The company outpaced the Zacks Consensus Estimate in each of the trailing four quarters, the average positive beat being 6.70%.

Growth Drivers in Place

Dover continues its efforts to simplify the company’s portfolio and increase focus on markets with growth prospects. In sync with this, it has successfully completed the spin-off of the upstream energy businesses. Following the spin-off, the company no longer owns the Energy segment and is aligned into three reportable segments. Consequently, Dover's core platforms, which compete in lower volatility industrial markets, will be well poised to provide a strong foundation for reinvestment, long-term sustainable revenues, earnings growth and strong free cash-flow generation.

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.

Dover also has a long tradition of making successful acquisitions in diverse end markets. The company will also gain from product digitization, e-commerce, new product development, and inorganic investment in core business platforms.

Other Stocks to Consider

A few other top-ranked stocks in the Industrial Products sector are Northwest Pipe Company NWPX, Tennant Company TNC and Casella Waste Systems, Inc. CWST. While Northwest Pipe and Tennant sport a Zacks Rank #1 (Strong Buy), Casella Waste Systems carries a Zacks Rank #2 (Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Northwest Pipe has an expected earnings growth rate of 15.8% for the current year. The stock has appreciated 39% in a year’s time.

Tennant has a projected earnings growth rate of 29.8% for 2019. The company’s shares have rallied 26.5% over the past year.

Casella Waste Systems has an estimated earnings growth rate of 37.7% for the ongoing year. The company’s shares have gained 32.6% in the past year.

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Dover Corporation (DOV) : Free Stock Analysis Report
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