Dover Corporation DOV looks promising at the moment on the back of an upbeat outlook, improved performance by the Engineered Systems and Fluids segments, strong bookings and backlog, cost-reduction initiatives and restructuring programs. The company’s shares have gained around 26.9% year to date.
Dover currently has a Zacks Rank #2 (Buy) and a VGM Score of B. Our research shows that stocks with a VGM Score of A or B combined with a Zacks Rank #1 (Strong Buy) or 2, offer the best investment opportunities for investors.
The trend in earnings estimate revisions also indicates a solid earnings outlook for Dover.
Let's delve deeper into the factors that make Dover stock a compelling investment option at the moment.
Strong Q4 Results
Dover’s fourth-quarter 2018 adjusted earnings and revenues climbed 25% and 3.2%, respectively, on a year-over-year basis, and also beat the respective Zacks Consensus Estimate. Strong overall demand drove organic revenue growth at the Engineered Systems segment and Fluids segment, offsetting weak demand in the Refrigeration & Food Equipment segment.
Positive Earnings Surprise History
Dover outpaced the Zacks Consensus Estimate over the trailing four quarters, the average positive earnings surprise being 6.59%.
Earnings estimate revisions have the greatest impact on stock prices. The Zacks Consensus Estimate for Dover’s 2019 earnings has moved up around 1.8% over the past two months, reflecting analysts’ confidence in the stock.
For 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 the Belanger acquisition, partly offset by an expected 2% unfavorable impact from foreign currency exchange. On Jan 25, 2019, Dover completed the Belanger acquisition, which is expected to prove accretive to margins and adjusted earnings in 2019.
Strong Earnings Growth Prospect
The Zacks Consensus Estimate for Dover’s 2019 earnings is currently pegged at $5.75, reflecting an expected year-over-year growth of 15.69%. The same for first-quarter 2019 stands at $1.14. The stock also has a long-term expected earnings per share growth rate of roughly 12%.
Growth Drivers in Place
Dover’s bookings and backlog improved year over year in fourth-quarter 2018. The company’s first-quarter 2019 results are likely to improve on strong bookings growth, solid order backlog, margin improvement and rightsizing programs. Through the year, impressive performance by the Engineered Systems and Fluids segments with strong organic growth, benefits from cost-containment actions as well as footprint optimization projects and retail refrigeration will negate the impact of weak demand in the Refrigeration & Food Equipment segment.
Dover expects to benefit in 2019 from its targeted cost-reduction initiative. 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. The company expects annualized run rate savings of $18 million in 2019.
Dover continues its efforts to simplify the portfolio and increase focus on markets with growth prospects. In sync with this, it has successfully completed the spin-off of its upstream energy businesses — Apergy — in May 2018. Following the spin-off, the company no longer has the Energy segment and has three reportable segments. Thus, the divestment will enable Dover to focus on less volatile core platforms by delivering innovative equipment and components, specialty systems, consumable supplies, software and digital solutions, and support services.
Dover Corporation Price and Consensus
Dover Corporation Price and Consensus | Dover Corporation Quote
Other Stocks to Consider
Some other top-ranked stocks in the Industrial Products sector are Axon Enterprise, Inc AAXN, Alarm.com Holdings, Inc. ALRM and Ennis, Inc. EBF each sporting Zacks Rank #1. 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 90.9% in the past year.
Alarm.com has an expected earnings growth rate of 7.8% for 2019. The stock has climbed 74.3% in a year’s time.
Ennis has an expected earnings growth rate of 13.9% for 2019. Its shares have gained 2.3% in the past year.
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