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Dover (DOV) Beats on Q3 Earnings, Reaffirms '17 EPS View

Dover Corporation DOV reported third-quarter 2017 adjusted earnings per share from continuing operations of $1.16, which surged 40% from 83 cents recorded in the prior-year quarter. Earnings also beat the Zacks Consensus Estimate of $1.11.

On a reported basis, Dover posted earnings per share of $1.14 for the quarter, up 37% year over year. The reported quarter included disposition and Wellsite separation related costs of 2 cents, while the year-earlier quarter did not have any such adjustments.

Total revenues increased 17% year over year to $2 billion in the quarter, which came ahead of the Zacks Consensus Estimate of $1.98 billion. The year-over-year increase was driven by acquisition growth of 10%, organic growth of 9% and a favorable impact from foreign exchange of 1%, partly offset by a 3% impact from dispositions.

Dover Corporation Price, Consensus and EPS Surprise

 

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

Costs and Margins

Cost of sales climbed 17% year over year to $1.26 billion in the reported quarter. Gross profit rose 17.8% year over year to $744 million. Gross margin remained flat year over year at 37%.

Selling, general and administrative expenses increased to $470.5 million from $421 million recorded in the prior-year quarter. Operating profit jumped 30% to $273.8 million from $210.7 million in the year-ago quarter. Operating margin expanded 130 basis points (bps) to 13.6%.

Segmental Performance

Energy revenues climbed 31% year over year to $359.3 million in the quarter. The segment reported an operating profit of $51.9 million compared to $13.3 million recorded in the comparable period last year.

Revenues in the Engineered Systems segment advanced to $645.8 million from $570.6 million recorded in the year-earlier quarter. The segment’s income inched up 1.1% year over year to $98.3 million.

Revenues in the Fluids segment were up 36% year over year to $562.8 million in the reported quarter. The segment’s income surged 32% year over year to $87.2 million.

The Refrigeration & Food Equipment segment’s revenues dropped 2.8% to $438.8 million from $451.3 million recorded in the prior-year quarter. The segment reported an operating income of $65.4 million, up from $64 million in the prior-year period.

Bookings and Backlog

Dover’s bookings at the end of the third quarter were worth $1.94 billion, up from $1.69 billion at the end of third-quarter 2016. Backlog also increased to $1.27 billion at the end of the reported quarter from $1.08 billion recorded at the year-ago quarter end.

Financial Position

Dover generated free cash flow of $214.5 million in the quarter compared with $188.8 million in the prior-year quarter. Cash flow from operations came in at $268 million in the reported quarter compared with $231.7 million witnessed in the year-ago quarter.

Dover continues to make strides in simplifying its portfolio. Along with planned Wellsite separation, the company recently signed an agreement to sell the consumer and industrial winch business of Warn for $250 million. This deal will help it focus on core growth platforms. The Warn sale is expected to close in the fourth quarter, subject to closing conditions.

Outlook

Dover reaffirmed its earnings per share guidance range of $4.23-$4.33 for full-year 2017. The company raised revenue guidance and projects it to grow in the range of 14-15% compared with the previous outlook of 12-14%. The revenue growth guidance comprises organic growth of 6-7% and acquisition growth of approximately 10%, partially offset by a 2% impact from the dispositions.

Share Price Performance

Over the last year, Dover underperformed the industry with respect to price performance. The stock gained 34.8%, while the industry recorded growth of 35.8% during the same time frame.



Zacks Rank

Dover currently carries a Zacks Rank #2 (Buy).

Other top-ranked companies in the same sector are Barnes Group Inc. B, Altra Industrial Motion Corp. AIMC and Graco Inc. GGG. While Barnes Group sports a Zacks Rank #1 (Strong Buy), Altra Industrial Motion and Graco carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Barnes Group has a long-term expected earnings growth rate of 9%.

Altra Industrial Motion has a long-term expected earnings growth rate of 8%.

Graco has a long-term expected earnings growth rate of 10.5%.

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