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Dover (DOV) Earnings and Revenues Trump Estimates in Q4

Zacks Equity Research

Dover Corporation DOV reported fourth-quarter 2018 adjusted earnings per share from continuing operations of $1.43. The figure improved 25% from $1.14 in the prior-year quarter, mainly driven by a lower annualized effective tax rate (ETR) and discrete tax items. Earnings also beat the Zacks Consensus Estimate of $1.29.
 
On a reported basis, Dover posted earnings per share of $1.07 in the quarter, down 42% year over year. Earnings included acquisition-related amortization costs of 18 cents and rightsizing costs of 20 cents.
 
Total revenues in the quarter came in at $1,809 million, up 3.2% from prior-year quarter. Revenues also beat the Zacks Consensus Estimate of $1,775 million. Strong overall demand in the quarter drove 5.8% organic revenue growth at the Engineered Systems segment and 8.7% at Fluids segment, offsetting weak demand in the Refrigeration & Food Equipment segment. Overall organic growth in the quarter was 6.2%.

2018 Performance

Dover reported adjusted earnings per share of $4.97 for 2018, up 20% from $4.15 per share recorded in the prior year Earnings also surpassed the Zacks Consensus Estimate of $4.84.
 
Revenues grew 3% year over year to $7 billion from $6.8 billion in 2017 buoyed by organic growth of 3.7%. Revenues beat the Zacks Consensus Estimate of $6.96 billion.

Costs and Margins

Cost of sales grew 5.6% to $1,164 million in the fourth quarter. Gross profit dropped 0.6% year over year to $645 million.

Selling, general and administrative expenses contracted 8.4% to $426 million from $465 million in the prior-year quarter. Operating profit increased 18.4% to $219 million from $185 million in the year-ago quarter.

Dover Corporation Price, Consensus and EPS Surprise

 

Dover Corporation Price, Consensus and EPS Surprise | Dover Corporation Quote

Segmental Performance
 
Revenues at the Engineered Systems segment edged up 1% to $697 million from $690 million recorded in the year-ago quarter.  The segment’s income declined 47% year over year to $114 million.
 
Revenues at the Fluids segment were up 14.5% year over year to $786 million in the quarter. The segment’s income rose 19.6% year over year to $128 million.
 
The Refrigeration & Food Equipment segment’s revenues declined 13.3% to $327 million from $377 million in the prior-year quarter. The segment’s operating income declined 55% year over year to $13million.

Bookings and Backlog
 
Dover’s bookings at the end of the fourth quarter were worth $1.85 billion, up from $1.71 billion at the end of fourth-quarter 2017. Backlog increased 16.4% to $1.35 billion at the end of the reported quarter from a year ago.
 
Financial Position
 
Dover generated free cash flow of $334 million during the fourth quarter compared with $246 million in the prior-year quarter. Cash flow from operations came in at $371 million in the reported quarter compared with $285 million in the year-ago quarter.
 
Outlook
 
In 2019, Dover expects to generate adjusted earnings per share in the range of $5.65-$5.85. The company guided full-year revenue growth of 2-3%, comprising organic growth of 2-4% and a 1% impact from Belanger acquisitions, partly offset by an expected 2% unfavorable impact from foreign currency exchange.

Recently, Dover completed the acquisition of Belanger, which is expected to prove accretive to margins and adjusted earnings in 2019.
 
Share Price Performance

Over the past year, Dover has lost around 26% compared with the industry’s decline of 16.1%.



Zacks Rank & Key Picks

Dover carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the Industrial Products sector include Axon Enterprise, Inc AAXN, Bemis Company, Inc BMS and EnerSys ENS. While Axon flaunts a Zacks Rank #1 (Strong Buy), Bemis and EnerSys carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Axon has an expected earnings growth rate of 14.5% for 2019. The company’s shares have rallied 79.4% in the past year.

Bemis has an expected earnings growth rate of 7.4% for 2019.  The stock has gained 3.6% in a year’s time.

EnerSys has an expected earnings growth rate of 9.5% for 2019. Its shares have climbed 17.4% in the past year.

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