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Dover Corporation (DOV)
Q3 2012 Earnings Call
October 17, 2012 10:00 am ET
Robert Livingston – President, Chief Executive Officer
Brad Cerepak – Senior Vice President, Chief Financial Officer
Paul Goldberg – Vice President, Investor Relations
Shannon O’Callaghan – Nomura
Charlie Brady – BMO Capital
Jeff Sprague – Vertical
John (Inaudible) – Deutsche Bank
Scott Davis – Barclays
Nigel Coe – Morgan Stanley
Deane Dray – Citi Research
Julian Mitchell – Credit Suisse
Mike Wherly – Janney Capital Markets
Mick Dobray – Robert W. Baird
Nathan Jones – Stifel Nicolaus
Previous Statements by DOV
» Dover CEO Discusses Q2 Results - Earnings Call Transcript
» Dover's CEO Discusses Q1 2012 Results - Earnings Call Transcript
» Dover's CEO Discusses Q4 2011 Results - Earnings Call Transcript
I would now like to turn the conference over to Mr. Paul Goldberg. Mr. Goldberg, please go ahead, sir.
Thank you, Paula. Good morning and welcome to Dover’s third quarter earnings call. Today’s call will begin with comments from Bob and Brad on Dover’s third quarter operating and financial performance and follow with our outlook for the remainder of the year. We will then open the call up for questions. As a courtesy, we kindly ask that you limit yourself to one question with a follow-up.
Please note that our current earnings release, investor supplement and associated presentation can be found on our website, www.dovercorporation.com. This call will be available for playback through October 31 and the audio portion of this call will be archived on our website for three months. The replay telephone number is 1-800-585-8367. When accessing the playback, you’ll need to supply the following access code: 37297489.
And before we get started, I’d like to remind everyone that our comments today, which are intended to supplement your understanding of Dover, may contain certain forward-looking statements that are inherently subject to uncertainties. We caution everyone to be guided in their analysis of Dover Corporation by referring to our Form 10-K for a list of factors that could cause our results to differ from those anticipated in any such forward-looking statements. Also, we undertake no obligation to publicly update or revise any forward-looking statements except as required by law. We would also direct your attention to our website where considerably more information can be found.
And with that, I’d like to turn this call over to Bob.
Thanks, Paul. Good morning everyone and thank you for joining us for this morning’s conference call. Before I get to our third quarter results, I’d like to share a few observations on the macro environment during the quarter. During our last quarterly call, we discussed the significant decline we had experienced in Europe and moderating activity in China. We also saw North American markets as mostly stable. Ninety days later, I would say these trends are generally continuing. Europe has remained at a low level, though the weakness is broader-based than last quarter. China has weakened, especially with respect to the electronics markets. The bright spot this quarter again was U.S. industrial activity. In summary, these conditions result in moderately slower global growth rates as we enter the fourth quarter.
Now some comments on our third quarter results. We posted revenue of 2.2 billion in the quarter, an increase of 3%. Our third quarter EPS of $1.32 was an 11% improvement over the prior year, largely driven by strong leverage on volume. In our energy segment, expanding production activity and strong downstream investments in distribution and retail fueling are among the trends that drove excellent business results in the quarter. Our drilling results were impacted by the lower year-over-year North American rig count, though rig count did increase sequentially. Overall, energy’s performance was characterized by continuing growth and strong margins. We expect these trends to continue in the fourth quarter.
At our communication technology segment, several handset OEMs launched new products towards the end of the quarter, which drove solid sequential results. Our MEMS activity was very strong, reflecting the breadth of our OEM coverage and the benefits of multiple design wins. The challenges at Sound Solutions led to lower revenue than expected. This along with normal seasonality in the handset market will continue to impact results through year-end. While I was disappointed with our performance at Sound Solutions, we continued to work through significant business transitions and are making substantial progress. I firmly believe we will make further progress in this important business in the coming months.
Within our engineered systems segment, refrigeration and food equipment markets remain quite solid and our business performance was strong. Regarding our fluids platform, markets remain much the same as last quarter, highlighted by the excellent results of recent acquisitions. We expect the segment’s fourth quarter results to reflect the normal seasonality of our refrigeration markets and slightly moderating macro growth trends.
Within our printing and identification segment, strong organic growth in our fast-moving consumer goods market, along with the benefits of our second quarter restructuring, helped drive solid margin performance. The China electronics equipment market weakened through the quarter and was below our prior expectations. We believe this trend will continue and now project this segment’s performance to be lower in the fourth quarter. Overall, the strong market positions of our businesses and productivity initiatives enabled us to deliver third quarter segment margin of 18%.