Dover Corporation
(
DOV
) reported its second-quarter 2012 earnings of $1.15 per share,
beating the Zacks Consensus Estimate of $1.14. Results inched up 1%
from the prior-year quarter's earnings of $1.14 per share.
On the reported basis, earnings were $1.15 per share compared with
the prior-year quarter earnings of $1.26. The prior-year quarter
earnings included the benefits of tax gains of 12 cents per share.
Operational Update
Total revenues were $2.157 billion, improving 8% year over year,
missing the Zacks Consensus Estimate of $2.186 billion. The revenue
increase included an organic growth of 3% and increase from
acquisitions by 7%, partially offset by negative impacts of 2% from
foreign currency.
Cost of sales soared 10% to $1.339 billion versus $1.219 billion in
the year-ago quarter. Gross profit of the company went up 5.4% year
over year to $817.6 million. However, gross margin contracted 100
basis points (bps) to 37.9% in the quarter.
Selling and administrative expenses also increased 10% to $494.1
million in the quarter. Operating profit dropped 1.3% to $323.5
million. Operating margin was 15%, a 140 bps contraction over the
prior-year quarter.
Segmental Performance
Revenues in the Communication Technologies segment escalated 25% to
$361.7 million. The segment's income, however, dipped 8.4% to $50.3
million, and operating margin dropped 500 bps year over year to
13.9%.
Energy reported total revenues of $538.8 million in the quarter
under review compared with $454.3 million in the year-ago quarter.
The segment's operating income shot up 21.3% to $133.9 million from
$110.4 million in the year-earlier quarter. The segment's margin
expanded 60 bps year over year to 24.9% in the reported quarter.
Net sales in the Engineered Systems segment increased 7.6% to
$886.1 million in the quarter from $823.2 million in the year-ago
quarter. The segment's income surged 4.1% to $133.8 million from
$128.6 million in the year-earlier quarter. Operating margin of the
segment contracted 50 bps year over year to 15.1%.
Total revenues of Printing & Identification segment fell 16% to
$370.2 million from $429.5 million in the prior-year quarter. The
segment reported operating income of $41.7 million, down 63% from
$68 million in the last-year's quarter, contracting the operating
margin by 450 bps year over year to 11.3%.
Bookings and Backlog
The company ended the second quarter with $2.14 billion worth of
bookings versus $1.96 at the end of the second quarter 2011.
Backlog of the company increased to $1.66 billion at end of the
reported quarter from $1.48 billion at second quarter 2011.
Free Cash Flow & Acquisition
Dover generated free cash flow of $177.8 million in the reported
quarter compared with $132.9 million in the year-ago quarter.
Recently, Dover completed the acquisition of a leading provider of
artificial lift products and services for the oil and gas industry,
Production Control Services, Inc. The transaction value of the deal
was nearly $220 million.
Outlook for 2012
Dover expects revenue growth in the range of 8%-10%, down from the
previous guidance of 10%-14%. Organic revenue growth will
contribute 3%-5% while acquisitions will add 5% to the revenue
growth. It expects earnings to lie in the band of $4.70-$4.85.
Our view
Dover's expansion has been mainly driven by acquisitions and its
acquisition pipeline is ever active. Production Control Services,
Inc. will complement the Norris Production Solutions, an operating
unit within Dover's Energy segment. The acquisition will help Dover
to pursue its strategy to become the market leader in the field of
artificial lift. Further, it will be able to foray into the
artificial lift market with a wider and diversified range of
products.
Dover has access to the volatile semiconductor and electronics
end-markets through its Printing and Identification segment. Lower
volumes reduced operating leverage in the semiconductor business
during the first-quarter 2012. As regards development, we do not
expect anything noteworthy in the semiconductor sector in 2012 and
thus remain cautious regarding the outlook for Printing and
Identification.
Dover competes with companies like
Cooper Industries plc
(
CBE
) and
Weatherford International Ltd.
(
WFT
). Dover retains a short-term Zacks #4 Rank (Sell). We have a
long-term Neutral recommendation on the stock.
COOPER INDS PLC (CBE): Free Stock Analysis
Report
DOVER CORP (DOV): Free Stock Analysis Report
WEATHERFORD INT (WFT): Free Stock Analysis
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