Dover (DOV) Rides on Strong Demand & Cost-Cutting Actions
Dover Corporation DOV is gaining from solid end-market demand across all segments, bookings rates and robust order backlog. Benefits from cost-reduction actions, productivity gains, focus on investments and acquisitions as well as efforts to reduce debt levels are also driving growth.
In January, Dover reported impressive fourth-quarter 2021 results, with earnings and sales beating the respective Zacks Consensus Estimates and rising year over year. The company has a trailing four quarters earnings surprise of 12.3%, on average.
Strong Order & Margin Conversion to Drive Growth
Dover has been gaining from robust order trends across the majority of its businesses for a while, stemming from strong end-market demand. The company is well poised to deliver robust top-line growth, margin expansion and double-digit earnings per share (EPS) growth in 2022, driven by a strong backlog, margin conversion efforts and benefits from acquisitions. DOV expects adjusted EPS to be between $8.45 and $8.65 for 2022, up from $7.63 per share reported in 2021. Organic revenue growth is expected between 7-9% for 2022. Apart from this, the company’s productivity and cost-control initiatives will continue to drive bottom-line growth.
Segments Poised Well on Strong Demand
In the Engineered Products segment, demand for engineered products, vehicle service and industrial automation has been solid. Improved price cost spread, strong shipping backlog and high booking across the business will likely support the segment’s margin in 2022. The Clean Energy and Fueling segment will gain from underground vehicle wash and software solutions.
The Imaging & Identification segment will continue to benefit from strong demand for consumables and fast-moving consumer goods solutions. The marking & coding business is expected to maintain its growth trajectory with serialization and brand protection software. Digital textile printing is recovering from the pandemic-induced declines seen in the last two years.
In the Pumps & Process Solutions business, demand for biopharma connectors and pumps will likely be healthy, aided by COVID vaccine and non-COVID-related pharmaceutical tailwinds. Positive price/cost, volume growth, productivity gains as well as favorable product and business mix will drive the Imaging & Identification and Pumps & Process Solutions segments’ margin in the current year.
The Climate and Sustainability Technologies segment will perform well in 2022, given the large backlog and continued elevated order rates. New orders and core food retail business have been healthy across its product segments. Also, its heat exchanger and beverage packaging business are seeing strong order rates.
Other Factors
Dover is focused on investments in capacity expansions in high-growth businesses and productivity improvements across its portfolio. Dover has a long tradition of making successful acquisitions in diverse end markets. It deployed $1.1 billion in nine bolt-on acquisitions in 2021, including Acme and RegO. These acquisitions are contributing to the company’s top line. Dover will remain active on the buyout front in 2022.
The company’s efforts to reduce debt levels, solid financial position, prudent capital structure, refinancing efforts and momentum in operational execution bode well.
Price Performance
Dover’s shares have gained 11.2% in the past year against the industry’s loss of 12.1%.
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Zacks Rank & Stocks to Consider
Dover currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the Industrial Products sector include Applied Industrial Technologies, Inc. AIT, Sonoco Products Company SON and Silgan Holdings Inc. SLGN. While AIT sports a Zacks Rank #1 (Strong Buy), SON and SLGN carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Applied Industrial Technologies reported adjusted EPS of $1.46 in second-quarter fiscal 2022 (ended Dec 31, 2021), up 49% year on year and beating the Zacks Consensus Estimate of $1.09. AIT has a trailing four-quarter earnings surprise of 27.9%, on average.
Applied Industrial Technologies has an expected earnings growth rate of 24.8% for fiscal 2022. The Zacks Consensus Estimate for fiscal year earnings has moved up 9.4% in the past 60 days. AIT’s shares have appreciated 9% in a year.
Sonoco’s fourth-quarter 2021 adjusted EPS increased 9.8% year over year to 90 cents, beating the Zacks Consensus Estimate of 89 cents. SON has a trailing four-quarter earnings surprise of 1.74%, on average.
Sonoco has an estimated earnings growth rate of around 30.9% for 2022. In the past 60 days, the Zacks Consensus Estimate for current-year earnings has been revised upward by 18.3%.
Silgan Holdings’ fourth-quarter 2021 adjusted EPS increased 32% year over year to a record 79 cents, beating the Zacks Consensus Estimate of 73 cents. SLGN has a trailing four-quarter earnings surprise of 3.8%, on average.
Silgan has a projected earnings growth rate of 13.5% for the current year. The Zacks Consensus Estimate for 2022 earnings has moved north by 3% in the past 60 days. In a year’s time, SLGN has moved up 1%.
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