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Dover (DOV) to Report Q4 Earnings: What's in the Offing?

Zacks Equity Research

Dover Corporation DOV is set to release fourth-quarter results, before the opening bell on Jan 29.

Third-quarter 2018 adjusted earnings per share from continuing operations were $1.36. The figure improved 14% from the year-ago quarter and beat the Zacks Consensus Estimate of $1.29. Total revenues came in at $1,747 million, flat with the prior-year quarter. Sales however missed the Zacks Consensus Estimate of $1,756 million.

In the last reported quarter, the company posted a positive earnings surprise of 5.4%. Notably, Dover surpassed the Zacks Consensus Estimate in each of the last four quarters, the average surprise being 6.04%.

Dover’s shares have lost 24.7% in the past year, compared with the industry’s decline of 17.6%.



Let’s see how things are shaping up prior to this announcement.

Dover Corporation Price and EPS Surprise

 

Dover Corporation Price and EPS Surprise | Dover Corporation Quote

Earnings Whispers

Our proven model shows that Dover is likely to beat estimates in the fourth quarter. That is because a stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is the case here as you will see below:

Earnings ESP: Earnings ESP for Dover is +0.93%. This is because the Most Accurate Estimate and the Zacks Consensus Estimate are currently pegged at $1.30 and $1.29, respectively. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Dover currently carries a Zacks Rank #3, which when combined with a positive ESP, makes us reasonably confident of an earnings beat.

Note that we caution against Sell-rated stocks (#4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Factors at Play

The company’s cost-cutting initiative, which includes overhead reduction, will boost margins. Dover’s restructuring program will also bring down SG&A expenses. In the third quarter, the company realized $8 million in cost savings and expects $16 million of incremental benefits in the next quarter. Dover also expects momentum in orders and improved performance by the Fluids segment to help offset persistently weak demand in the Refrigeration & Food Equipment segment. Dover’s bookings increased 3% year over year at the end of third-quarter 2018. Backlog also increased 12% to $1.34 billion at the end of the third quarter from a year ago. Backed by solid bookings growth, the company is poised for an improved fourth-quarter performance. However, input cost inflation due to the implementation of tariffs on steel and aluminum is likely to dent margins.

The Zacks Consensus Estimate for Dover’s earnings moved roughly 0.8% down over the last 60 days and is currently pinned at $1.29 for the fourth quarter. The earnings estimate reflects year-over-year growth of around 14.1%. The Zacks Consensus Estimate for total sales of $1,773 million for the quarter reflects a decline of 12% from the prior-year quarter.
 
Coming to the segments, the Zacks Consensus Estimate for Dover’s Fluids segment net sales is pegged at $738 million for the quarter, representing a year-over-year increase of 21%. The segment will benefit from improved operational performance, fueling and transport businesses and cost control actions taken during the fourth quarter.

The Zacks Consensus Estimate for Refrigeration and Food Equipment segment’s net sales is $335 million for the fourth quarter, representing a year-over-year decline of 11.1%. In the third quarter, the segment was affected by delayed shipments at the Belvac business. The company expects revenues at the segment remain affected by softness in the retail refrigeration market.

Meanwhile, the Zacks Consensus Estimate calls for Engineered Systems segment revenues of $693 million for the fourth quarter, representing a year-over-year improvement of 4%.

Other Stocks to Consider

Here are a few other companies that you may want to consider, as our model shows these too have the right combination of elements to post an earnings beat this quarter:

New Gold Inc. NGD has an Earnings ESP of +166.67% and carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

B2Gold Corp. BTG has an Earnings ESP of +12.50% and carries a Zacks Rank #3.

Ryerson Holding Corporation RYI has an Earnings ESP of +48.34% and carries a Zacks Rank #3.

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