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Dover (DOV) Q2 Earnings & Sales Beat Estimates, Rise Y/Y

Dover Corporation DOV reported second-quarter 2018 adjusted earnings per share from continuing operations of $1.30. The figure improved 21% from $1.07 recorded in the prior-year quarter, mainly driven by a strong overall demand environment. Earnings also beat the Zacks Consensus Estimate of $1.21.

On a reported basis, Dover posted earnings per share of $1.08 in the quarter, which increased around 20% year over year. Earnings in the reported quarter included acquisition-related amortization costs of 18 cents, and rightsizing and other costs of 3 cents.

Total revenues increased 3% year over year to $1.80 billion, driven by organic growth of 3% and a favorable foreign exchange impact of 2%, partly offset by a net 2% impact from previous acquisitions and dispositions. Strong overall demand in the second quarter drove 4% revenue growth in Engineered Systems segment and 10% in Fluids segment, offsetting demand weakness in Refrigeration & Food Equipment segment. Sales also came ahead of the Zacks Consensus Estimate of $1.78 billion.

Dover Corporation Price, Consensus and EPS Surprise

 

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

Costs and Margins

Cost of sales climbed 4.6% year over year to $1.13 billion in the second quarter. Gross profit inched up 1.7% year over year to $665 million. Gross margin shrunk 60 basis points (bps) year over year to 37%.

Selling, general and administrative expenses flared up to $428.8 million from $421.3 million witnessed in the prior-year quarter. Operating profit was up 1.6% to $236.5 million from $232.8 million reported in the year-ago quarter. Operating margin contracted 40 bps to 13%.

Segmental Performance

In the second quarter, the Apergy spin-off within Dover’s Energy segment was completed, and its financial results are now reported as discontinued operations. Thus, Dover will now report results in three segments.

Revenues in the Engineered Systems segment ascended to $703 million from $678 million recorded in the year-earlier quarter. The segment’s income rose around 15% year over year to $126.6 million.

Revenues in the Fluids segment were up 9.5% year over year to $693.7 million in the quarter. The segment’s income rose 1.7% year over year to $93 million.

The Refrigeration & Food Equipment segment’s revenues declined to $401.8 million from $426 million recorded in the prior-year quarter. The segment reported an operating income of $51.4 million, down from $65.8 million witnessed in the year-ago period.

Bookings and Backlog

Dover’s bookings at the end of the second quarter were worth $1.89 billion, up from $1.77 billion witnessed at the end of second-quarter 2017. Backlog also increased to $1.38 billion at the end of the reported quarter from $1.26 billion recorded at the year-ago quarter end.

Financial Position

Dover generated free cash flow of $107.5 million during the second quarter compared with a cash inflow of $110.5 million witnessed in the prior-year quarter. Cash flow from operations came in at $159 million in the reported quarter compared with $152.5 million in the year-ago quarter.

Outlook

Dover revised its adjusted earnings per share guidance for full-year 2018 to $4.75-$4.85. The mid-point of the guidance reflects a year-over-yearincrease of 16%. This guidance is based on full-year revenue growth of 2-3%, comprising organic growth of 3-4%, acquisition growth of 1% and a favorableforeign exchange impact of 1%, partially offset by a 3% impact from dispositions.

Dover expects to benefit from targeted cost reduction initiatives. It will also gain from product digitization, e-commerce, new product development, and inorganic investment in core business platforms.

Share Price Performance

Over the past year, Dover has underperformed the industry with respect to price performance. The stock has lost 13%, while the industry recorded growth of around 3% during the same time frame.



 

Zacks Rank & Key Picks

Dover currently carries a Zacks Rank #4 (Sell).

Better-ranked stocks in the same sector include Chart Industries, Inc. GTLS, Roper Technologies, Inc. ROP and Welbilt, Inc. WBT. While Chart Industries sports a Zacks Rank #1 (Strong Buy), Roper and Welbilt carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Chart Industries has a long-term earnings growth rate of 26.9%. The stock has appreciated 92% in a year’s time.

Roper Technologies has a long-term earnings growth rate of 12.3%. Its shares have rallied 20% in the past year.

Welbilt has a long-term earnings growth rate of 10%. The company’s shares have been up 15% over the past year.

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