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Dover Shares Up 48% In a Year: What's Working in Favor?

Zacks Equity Research

Shares of Dover Corporation DOV have rallied 48.3% over the past year, aided by an upbeat outlook, improved performance by the Engineered Systems and Fluids segments, strong demand and solid backlog as well as cost-reduction initiatives. The company has outperformed its industry’s rise of 30.3% during the same time frame.



Dover, currently a Zacks Rank #3 (Hold) stock, has a market cap of roughly $16.82 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:

Upbeat Outlook

Dover’s fourth-quarter 2019 results are likely to reflect its robust order backlog as well as execution of margin targets. In addition, impressive performance in the Engineered Systems and Fluids segments, along with benefits from cost-containment actions, footprint-optimization projects and retail refrigeration, are likely to have muted the impact of soft demand in the Refrigeration & Food Equipment segment.

The company projects adjusted EPS at $5.82-$5.85 for 2019. 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.

Strong Earnings Growth Prospect

The Zacks Consensus Estimate for Dover’s 2020 earnings is currently pegged at $6.29, reflecting expected year-over-year growth of 7.6%.

Positive Earnings Surprise History

The company outpaced the Zacks Consensus Estimate in each of the trailing four quarters, the average positive beat being 6.7%.

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 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 robust foundation for reinvestment, long-term sustainable revenues, earnings growth and strong free cash-flow generation.

Dover’s cost-reduction initiatives are likely to boost its margins. 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. Moreover, the company will gain from product digitization, e-commerce, new product development, and inorganic investment in core business platforms.

Dover has a long tradition of making successful acquisitions in diverse end markets. Recently, the company agreed to acquire Systech International, a leading software and solutions provider for traceability of product, regulatory compliance and brand protection. The buyout will boost Dover’s Markem-Imaje's product identification and traceability solutions portfolio with high-end software and services for the growing global brand protection market.

Stocks to Consider

Some better-ranked stocks in the Industrial Products sector are DXP Enterprises, Inc. DXPE, Cintas Corporation CTAS and Graphic Packaging Holding Company GPK. While DXP Enterprises sports a Zacks Rank #1 (Strong Buy), Cintas and Graphic Packaging carry a Zacks Rank of 2 (Buy), at present. You can see the complete list of today's Zacks #1 Rank stocks here.

DXP Enterprises has an estimated earnings growth rate of 10.5% for the ongoing year. In a year’s time, the stock has appreciated 23.1%.

Cintas has an expected earnings growth rate of 15.6% for the current year. The stock has rallied 57.8% over the past year.

Graphic Packaging has a projected earnings growth rate of 13.1% for 2020. The company’s shares have gained 40.5% over the past year.

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