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Dover Corporation (DOV - Free Report) reported fourth-quarter 2017 adjusted earnings per share from continuing operations of $1.13, which surged 49% from 76 cents recorded in the prior-year quarter. Earnings also beat the Zacks Consensus Estimate of $1.04.
On a reported basis, Dover posted earnings per share of $1.88 for the quarter, up an impressive 83% year over year. The reported quarter included a 32 cents net benefit from the Tax Cuts and Jobs Act, a 70 cents net benefit from a disposition, and a 3 cents benefit from product recall reserve. The fourth-quarter 2017 EPS also included right-sizing and other costs of 25 cents, and Wellsite separation-related costs of 5 cents. The year-earlier quarter included a 36 cents net benefit from a disposition and a product reversal charge of 9 cents.
Total revenues increased 13% year over year to $2 billion in the quarter, which surpassed the Zacks Consensus Estimate of $1.99 billion. The year-over-year increase was driven by acquisition growth of 6%, organic growth of 8% and a favorable impact from foreign exchange of 2%, partly offset by a 3% impact from dispositions.
Dover Corporation Price, Consensus and EPS Surprise
Cost of sales climbed 10.7% year over year to $1.28 billion in the reported quarter. Gross profit rose 18.7% year over year to $735 million. Gross margin expanded 160 basis points (bps) year over year to 36.5%.
Selling, general and administrative expenses flared up to $536.1 million from $455.6 million recorded in the prior-year quarter. Operating profit jumped 21.5% to $199 million from $164.1 million reported in the year-ago quarter. Operating margin expanded 70 bps to 9.9%.
Segmental Performance
Energy revenues climbed 24% year over year to $363.6 million in the quarter. The segment reported an operating profit of $41.4 million compared to $30.9 million recorded in the comparable period last year.
Revenues in the Engineered Systems segment advanced to $667.4 million from $626.3 million recorded in the year-earlier quarter. The segment’s income surged a massive 118% year over year to $210.9 million.
Revenues in the Fluids segment were up 26% year over year to $609.6 million in the quarter. The segment’s income soared a whopping 164.7% year over year to $91.7 million.
The Refrigeration & Food Equipment segment’s revenues inched up 0.2% to $377.2 million from $376.4 million recorded in the prior-year quarter. The segment reported an operating income of $29 million, significantly down from $118 million recorded in the prior-year period.
Bookings and Backlog
Dover’s bookings at the end of the fourth quarter were worth $1.97 billion, up from $1.74 billion at the end of fourth-quarter 2016. Backlog also increased to $1.23 billion at the end of the quarter from $1.08 billion at the year-ago quarter end.
2017 Performance
Dover reported adjusted earnings per share of $4.03 in 2017, up 39% from $2.90 per share recorded in the prior year. Earnings outpaced the Zacks Consensus Estimate of $3.94. Including one-time items, the bottom line came in at $5.15, improving 58% from $3.25 recorded in 2016.
Revenues grew 15% year over year to $7.8 billion from $6.8 billion recorded in 2016. Revenues came in line with the Zacks Consensus Estimate.
Financial Position
Dover generated free cash flow of $302.6 million in the fourth quarter compared with $239.8 million in the prior-year quarter. Cash flow from operations came in at $319.6 million in the reported quarter compared with $289.0 million in the year-ago quarter.
Wellsite Separation Update
In December 2017, Dover announced a tax-free spin-off of its upstream energy businesses within the Energy segment — Wellsite. Dover expects to complete the spin-off of Wellsite in May 2018, subject to certain customary conditions.
For the year ended Dec 31, 2017, Wellsite's posted revenues of $1 billion, and earnings before interest, taxes, depreciation and amortization (EBITDA) were $242 million, excluding costs related to rightsizing and the Wellsite separation. For full-year 2018, it is expected to generate revenue growth of approximately 16% and EBITDA of approximately $315 million.
Outlook
Dover guides its earnings per share for full-year 2018 will be in the range of $5.73-$5.93, representing an increase of 19% over the prior year. Full-year revenue growth is projected in the 3%-5% range, which comprises organic growth of 5%-7%, and a favorable impact from FX of 1%, partially offset by a 3% impact from dispositions.
Dover expects its 2018 results to gain from continuous focus on execution of strategies. The company expects ample organic growth and margin expansion in excess of 100 bps in 2018. Further, as part of its disciplined capital-allocation plan, Dover expects to deploy capital toward acquisitions which will aid growth.
Share Price Performance
Over the last year, Dover underperformed the industry with respect to price performance. The stock has gained 32.2%, while the industry recorded growth of 33.4% during the same time frame.
Zacks Rank & Key Picks
Dover currently carries a Zacks Rank #3 (Hold).
Better-ranked stocks in the same sector include Applied Industrial Technologies, Inc. (AIT - Free Report) , EnPro Industries, Inc. (NPO - Free Report) and Illinois Tool Works Inc. (ITW - Free Report) . While Applied Industrial Technologies sports a Zacks Rank #1 (Strong Buy), EnPro Industries and Illinois Tool Works carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Applied Industrial Technologies has a long-term earnings growth rate of 12%. Its shares have appreciated 32.3%, over the past six months.
EnPro Industries has a long-term earnings growth rate of 15.5%. The company’s shares have rallied 17% during the same time frame.
Illinois Tool Works has a long-term earnings growth rate of 10.1%. The stock has gained 25.8% in six months’ time.
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Dover (DOV) Tops Q4 Earnings Estimates, Issues 2018 Guidance
Dover Corporation (DOV - Free Report) reported fourth-quarter 2017 adjusted earnings per share from continuing operations of $1.13, which surged 49% from 76 cents recorded in the prior-year quarter. Earnings also beat the Zacks Consensus Estimate of $1.04.
On a reported basis, Dover posted earnings per share of $1.88 for the quarter, up an impressive 83% year over year. The reported quarter included a 32 cents net benefit from the Tax Cuts and Jobs Act, a 70 cents net benefit from a disposition, and a 3 cents benefit from product recall reserve. The fourth-quarter 2017 EPS also included right-sizing and other costs of 25 cents, and Wellsite separation-related costs of 5 cents. The year-earlier quarter included a 36 cents net benefit from a disposition and a product reversal charge of 9 cents.
Total revenues increased 13% year over year to $2 billion in the quarter, which surpassed the Zacks Consensus Estimate of $1.99 billion. The year-over-year increase was driven by acquisition growth of 6%, organic growth of 8% and a favorable impact from foreign exchange of 2%, partly offset by a 3% impact from dispositions.
Dover Corporation Price, Consensus and EPS Surprise
Dover Corporation Price, Consensus and EPS Surprise | Dover Corporation Quote
Costs and Margins
Cost of sales climbed 10.7% year over year to $1.28 billion in the reported quarter. Gross profit rose 18.7% year over year to $735 million. Gross margin expanded 160 basis points (bps) year over year to 36.5%.
Selling, general and administrative expenses flared up to $536.1 million from $455.6 million recorded in the prior-year quarter. Operating profit jumped 21.5% to $199 million from $164.1 million reported in the year-ago quarter. Operating margin expanded 70 bps to 9.9%.
Segmental Performance
Energy revenues climbed 24% year over year to $363.6 million in the quarter. The segment reported an operating profit of $41.4 million compared to $30.9 million recorded in the comparable period last year.
Revenues in the Engineered Systems segment advanced to $667.4 million from $626.3 million recorded in the year-earlier quarter. The segment’s income surged a massive 118% year over year to $210.9 million.
Revenues in the Fluids segment were up 26% year over year to $609.6 million in the quarter. The segment’s income soared a whopping 164.7% year over year to $91.7 million.
The Refrigeration & Food Equipment segment’s revenues inched up 0.2% to $377.2 million from $376.4 million recorded in the prior-year quarter. The segment reported an operating income of $29 million, significantly down from $118 million recorded in the prior-year period.
Bookings and Backlog
Dover’s bookings at the end of the fourth quarter were worth $1.97 billion, up from $1.74 billion at the end of fourth-quarter 2016. Backlog also increased to $1.23 billion at the end of the quarter from $1.08 billion at the year-ago quarter end.
2017 Performance
Dover reported adjusted earnings per share of $4.03 in 2017, up 39% from $2.90 per share recorded in the prior year. Earnings outpaced the Zacks Consensus Estimate of $3.94. Including one-time items, the bottom line came in at $5.15, improving 58% from $3.25 recorded in 2016.
Revenues grew 15% year over year to $7.8 billion from $6.8 billion recorded in 2016. Revenues came in line with the Zacks Consensus Estimate.
Financial Position
Dover generated free cash flow of $302.6 million in the fourth quarter compared with $239.8 million in the prior-year quarter. Cash flow from operations came in at $319.6 million in the reported quarter compared with $289.0 million in the year-ago quarter.
Wellsite Separation Update
In December 2017, Dover announced a tax-free spin-off of its upstream energy businesses within the Energy segment — Wellsite. Dover expects to complete the spin-off of Wellsite in May 2018, subject to certain customary conditions.
For the year ended Dec 31, 2017, Wellsite's posted revenues of $1 billion, and earnings before interest, taxes, depreciation and amortization (EBITDA) were $242 million, excluding costs related to rightsizing and the Wellsite separation. For full-year 2018, it is expected to generate revenue growth of approximately 16% and EBITDA of approximately $315 million.
Outlook
Dover guides its earnings per share for full-year 2018 will be in the range of $5.73-$5.93, representing an increase of 19% over the prior year. Full-year revenue growth is projected in the 3%-5% range, which comprises organic growth of 5%-7%, and a favorable impact from FX of 1%, partially offset by a 3% impact from dispositions.
Dover expects its 2018 results to gain from continuous focus on execution of strategies. The company expects ample organic growth and margin expansion in excess of 100 bps in 2018. Further, as part of its disciplined capital-allocation plan, Dover expects to deploy capital toward acquisitions which will aid growth.
Share Price Performance
Over the last year, Dover underperformed the industry with respect to price performance. The stock has gained 32.2%, while the industry recorded growth of 33.4% during the same time frame.
Zacks Rank & Key Picks
Dover currently carries a Zacks Rank #3 (Hold).
Better-ranked stocks in the same sector include Applied Industrial Technologies, Inc. (AIT - Free Report) , EnPro Industries, Inc. (NPO - Free Report) and Illinois Tool Works Inc. (ITW - Free Report) . While Applied Industrial Technologies sports a Zacks Rank #1 (Strong Buy), EnPro Industries and Illinois Tool Works carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Applied Industrial Technologies has a long-term earnings growth rate of 12%. Its shares have appreciated 32.3%, over the past six months.
EnPro Industries has a long-term earnings growth rate of 15.5%. The company’s shares have rallied 17% during the same time frame.
Illinois Tool Works has a long-term earnings growth rate of 10.1%. The stock has gained 25.8% in six months’ time.
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