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Dover Corporation (DOV - Free Report) reported second-quarter 2016 adjusted earnings per share from continuing operations of 87 cents, which fell over 11% year over year. Earnings however beat the Zacks Consensus Estimate by a penny.
Including one-time items, earnings came in at 76 cents per share, down from the prior-year figure of 97 cents.
Total revenue declined 4% year on year to $1.69 billion in the quarter, which also fell short of the Zacks Consensus Estimate for revenues of $1.72 billion. The year-over-year slump in revenues was due to a fall of 7% in organic revenues, partly offset by 3% growth from acquisitions.
Cost of sales came down 4.4% year over year to $1.06 billion in the reported quarter. While gross profit decreased 3.6% year over year to $631 million, gross margin inched up 20 basis points (bps) to 37.4%.
Selling, general and administrative expenses increased to $437.4 million from $402.7 million in the prior-year quarter. Operating profit plunged 23% to $193.8 million from $251.9 million in the year-ago quarter. Operating margin contracted 280 bps to 11.5%.
Segmental Performance
Energy revenues slumped 29% year over year to $259 million in the quarter. The segment reported an operating loss of $0.8 million versus an operating income of $40.9 million a year ago.
Revenues in the Engineered Systems segment decreased to $592.4 million from $593 million in the year-ago quarter. The segment’s income improved 7.6% year over year to $104 million.
Revenues in the Fluids segment were up 15.5% year over year to $405.8 million in the reported quarter. The segment’s income dropped 23% year over year to $54 million.
The Refrigeration & Food Equipment segment’s revenues decreased to $429.4 million from $448 million in the prior-year quarter. The segment reported an operating income of $63.2 million, down from $65.7 million a year ago.
Bookings and Backlog
Dover’s bookings at the end of second quarter were worth $1.70 billion, which fell roughly 1.6% from $1.73 billion at the end of second-quarter 2015. Backlog also declined to $1.09 billion at the end of the reported quarter, from $1.16 billion at the year-ago quarter end.
Financial Position
Dover generated free cash flow of $172.4 million in the second quarter, compared with $175 million in the prior-year quarter. Cash flow from operations came in at $207.9 million in the reported quarter as against $218.9 million in the year-ago quarter.
Dover narrowed its 2016 earnings per share guidance range to $3.42–$3.52 (excluding one-time items) from the prior band of $3.57–$3.72. The company expects full-year revenue to dip 3%–5%, compared to the prior forecast of a revenue decline of 2%–5%. The guidance cut came on the back of delay in project timing & persistent softness in oil & gas related markets. Within this forecast, organic revenue is anticipated to drop 6%–8% versus an organic revenue decline of 5%–8% in the prior forecast. Acquisition revenue, net of dispositions of approximately 4% growth and the unfavorable influence of foreign exchange of 1%, remains unchanged.
Dover expects consistent stabilization of North-American rig count and constructive oil prices to modestly improve results in the second half of 2016 and drive growth in 2017. The company will marginally reduce its full-year expectations for Refrigeration & Food Equipment and Fluids to account for project timing and continued headwinds. In Refrigeration & Food Equipment, it anticipates certain large can shaping equipment orders and shipments to slip into 2017. Within Fluids, Dover expects sustained softness in oil & gas related markets.
Our Take
Dover intends to remain focused on expanding its business in key markets that offer significant growth potential and lead to organic and inorganic growth at all segments. Moreover, the company strives to innovate its products as per customer needs in order to gain market share. However, unstable oil prices and foreign exchange volatility remain matters of concern for Dover.
Illinois-based Dover is an industrial conglomerate producing a wide range of specialized industrial products and manufacturing equipment. It operates under four major segments, namely Energy, Engineered Systems, Fluids and Refrigeration & Food Equipment.
Zacks Rank
Dover currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the same sector are Nordson Corporation (NDSN - Free Report) , Ingersoll-Rand Plc (IR - Free Report) and Luxfer Holdings PLC (LXFR - Free Report) . While Nordson Corporation sports a Zacks Rank #1 (Strong Buy), Ingersoll-Rand and Luxfer Holdings carry a Zacks Rank #2 (Buy).
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Dover (DOV) Beats Q2 Earnings, Sales Lag, Curtails View
Dover Corporation (DOV - Free Report) reported second-quarter 2016 adjusted earnings per share from continuing operations of 87 cents, which fell over 11% year over year. Earnings however beat the Zacks Consensus Estimate by a penny.
Including one-time items, earnings came in at 76 cents per share, down from the prior-year figure of 97 cents.
Total revenue declined 4% year on year to $1.69 billion in the quarter, which also fell short of the Zacks Consensus Estimate for revenues of $1.72 billion. The year-over-year slump in revenues was due to a fall of 7% in organic revenues, partly offset by 3% growth from acquisitions.
Costs and Margins
Cost of sales came down 4.4% year over year to $1.06 billion in the reported quarter. While gross profit decreased 3.6% year over year to $631 million, gross margin inched up 20 basis points (bps) to 37.4%.
Selling, general and administrative expenses increased to $437.4 million from $402.7 million in the prior-year quarter. Operating profit plunged 23% to $193.8 million from $251.9 million in the year-ago quarter. Operating margin contracted 280 bps to 11.5%.
Segmental Performance
Energy revenues slumped 29% year over year to $259 million in the quarter. The segment reported an operating loss of $0.8 million versus an operating income of $40.9 million a year ago.
Revenues in the Engineered Systems segment decreased to $592.4 million from $593 million in the year-ago quarter. The segment’s income improved 7.6% year over year to $104 million.
Revenues in the Fluids segment were up 15.5% year over year to $405.8 million in the reported quarter. The segment’s income dropped 23% year over year to $54 million.
The Refrigeration & Food Equipment segment’s revenues decreased to $429.4 million from $448 million in the prior-year quarter. The segment reported an operating income of $63.2 million, down from $65.7 million a year ago.
Bookings and Backlog
Dover’s bookings at the end of second quarter were worth $1.70 billion, which fell roughly 1.6% from $1.73 billion at the end of second-quarter 2015. Backlog also declined to $1.09 billion at the end of the reported quarter, from $1.16 billion at the year-ago quarter end.
Financial Position
Dover generated free cash flow of $172.4 million in the second quarter, compared with $175 million in the prior-year quarter. Cash flow from operations came in at $207.9 million in the reported quarter as against $218.9 million in the year-ago quarter.
DOVER CORP Price, Consensus and EPS Surprise
DOVER CORP Price, Consensus and EPS Surprise | DOVER CORP Quote
Outlook
Dover narrowed its 2016 earnings per share guidance range to $3.42–$3.52 (excluding one-time items) from the prior band of $3.57–$3.72. The company expects full-year revenue to dip 3%–5%, compared to the prior forecast of a revenue decline of 2%–5%. The guidance cut came on the back of delay in project timing & persistent softness in oil & gas related markets. Within this forecast, organic revenue is anticipated to drop 6%–8% versus an organic revenue decline of 5%–8% in the prior forecast. Acquisition revenue, net of dispositions of approximately 4% growth and the unfavorable influence of foreign exchange of 1%, remains unchanged.
Dover expects consistent stabilization of North-American rig count and constructive oil prices to modestly improve results in the second half of 2016 and drive growth in 2017. The company will marginally reduce its full-year expectations for Refrigeration & Food Equipment and Fluids to account for project timing and continued headwinds. In Refrigeration & Food Equipment, it anticipates certain large can shaping equipment orders and shipments to slip into 2017. Within Fluids, Dover expects sustained softness in oil & gas related markets.
Our Take
Dover intends to remain focused on expanding its business in key markets that offer significant growth potential and lead to organic and inorganic growth at all segments. Moreover, the company strives to innovate its products as per customer needs in order to gain market share. However, unstable oil prices and foreign exchange volatility remain matters of concern for Dover.
Illinois-based Dover is an industrial conglomerate producing a wide range of specialized industrial products and manufacturing equipment. It operates under four major segments, namely Energy, Engineered Systems, Fluids and Refrigeration & Food Equipment.
Zacks Rank
Dover currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the same sector are Nordson Corporation (NDSN - Free Report) , Ingersoll-Rand Plc (IR - Free Report) and Luxfer Holdings PLC (LXFR - Free Report) . While Nordson Corporation sports a Zacks Rank #1 (Strong Buy), Ingersoll-Rand and Luxfer Holdings carry a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>