On Dec 13, we maintained our Neutral recommendation on
). The company is expected to benefit from acquisitions, growth
in bookings and orders and its focus on oil and gas, plastics and
petrochemicals markets. However, volatile raw material costs,
rising macroeconomic uncertainty and increased exposure in the
energy sector remain headwinds.
Why the Reiteration?
Dover, on Oct 17, reported adjusted earnings of $1.54 per share
in the third quarter of 2013, up 23% from the prior-year
quarter's earnings of $1.25 per share. The improvement was led by
organic growth across all segments, strength in drilling and
downstream markets and cost reduction activities. Total revenue
also increased 7% year over year to $2.25 billion including an
organic growth of 3% and a 4% contribution from acquisitions.
In Nov 2013, Dover closed its previously announced acquisition of
Italy-based Finder for $145 million. The acquisition will help
Dover strengthen the position of the Pump Solutions Group in the
energy market and enhance its global footprint.
Furthermore, Dover signed a definitive agreement to sell its DEK
Printing Machines unit (DEK) to Hong Kong-listed ASM Pacific
Technology. The sale, which is expected to close by mid-2014, is
likely to generate cash proceeds of $170 million. The deal will
simplify Dover's business profile and strengthen focus on its key
industrial growth spaces.
Dover generated cash flow from operating activities of $340
million in the third quarter, up from $286 million in the
prior-year quarter. Dover's total bookings also increased 9% year
over year to $2.2 billion. Dover will continue to benefit from
bookings and orders growth in the upcoming quarters.
The company also bought 650,000 shares in the third quarter for
about $57 million. With strong cash flow, management expects to
complete 70-80% of the remaining $343 million on the $1 billion
share buyback authorization by the end of 2013.
Despite these positives, revenues and margins in the Engineered
Systems and the Printing Technologies segments are likely to be
affected by rising macroeconomic uncertainty and limited credit
Additionally, Dover tweaked its earnings guidance to a range of
$5.57-$5.64 per share, from the prior earnings expectation of
$5.56-$5.71 a share, for the full-year 2013. This was due to
weaker-than-expected market conditions. Dover now anticipates
revenue growth of 7% against its previous projection of
Moreover, volatile raw-material costs, uncertainty regarding
governmental funding and above-average exposure to Europe will
remain headwinds for Dover in the near term.
Dover currently has a Zacks Rank #3 (Hold).
Other Stocks to Consider
Stocks in the same industry which are more favorably ranked
) with a Zacks Rank #1 (Strong Buy); and
DXP Enterprises, Inc.
), both with a Zacks Rank #2 (Buy).
DOVER CORP (DOV): Free Stock Analysis Report
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