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What Does Dover's Guidance Cut Mean for Your Portfolio? - Analyst Blog

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Dover CorporationDOV has slashed its 2015 guidance based on negative impact of foreign currency translation and slower capital spending. The diversified manufacturer of industrial products will also bear the brunt of challenging conditions in energy markets.

Dover outlined its 2015 earnings expectation between $4.20 and $4.40, down from the previous range of $4.70 and $4.95, which represents a reduction of 55 cents to the high-end of the prior guidance and 50 cents to the low-end. Approximately 20 cents of the full-year impact of this revised forecast will be reflected in the first quarter of 2015.

The company expects revenues for 2015 to decline -4% to -6% versus the prior forecast of +1% to -2%. The projection includes organic revenue of -2% to -4% and a 4% negative impact from foreign currencies which will be partly offset by 2% growth from completed acquisitions.

Dover stated that although its businesses performed well in 2014, they will be impacted by deterioration in the North American oil & gas markets and strengthening of the U.S. dollar against other currencies. Further, slower-than-anticipated capital spending in the company's core retail refrigeration end markets will result in lower full-year results than previously expected.

However, Dover remains focused on restructuring initiatives to better align its cost base. In line with this, the company has sold two businesses during the past three years for an aggregate consideration of $267.8 million in addition to the Knowles spin-off. The company has also aggressively taken restructuring actions over the last two quarters.

In Mar, 2015, Dover agreed to sell its Sargent Aerospace & Defense unit to RBC Bearings Incorporated ROLL for $500 million to reduce its exposure to cyclical markets and focus on higher margin growth spaces. The transaction, pursuant to customary closing conditions, is expected to close in the second quarter of 2015.

Last month, Dover sold its Datamax O'Neil unit to Honeywell International Inc. HON . The divestiture, which mainly pertains to workforce reductions and efforts to consolidate its manufacturing footprint, is expected to lead to over $50 million in annualized benefits. The estimated savings, utilization of sale proceeds to fund share repurchases and growth opportunities will boost the stock.

Though, Dover's growth was partially offset by higher restructuring charges in 2014, it expects to realize cost savings as a result of the restructuring programs initiated in late 2014 and early 2015. Savings will be within the range of $70.0 million to $75.0 million, which the company will recognize in 2015.

Dover is also poised to benefit from robust shipments in Printing & Identification, Waste Handling and Fluids as well as benefits from recent acquisitions. Moreover, a strong balance sheet position and increase in dividend and bookings will help in the company's long-term growth.

Notably, decline in oil prices has also been negatively impacting other companies of the industrial products sector. Recently, Pentair Ltd. PNR lowered its earnings and revenue guidance for first-quarter fiscal 2015.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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