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Dover (DOV) Gains From Solid End-Market Demand, Cost Control

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On May 25, we issued an updated research report on Dover Corporation (DOV - Free Report) . The company is poised to gain from solid end-market demand across all segments as well as robust bookings and backlogs. Focus on cost-reduction actions, margin improvement plan and acquisitions are also driving growth.

Stellar Demand to Aid Growth

Dover has been witnessing robust order trends across majority of its business lately. Order trends were particularly healthy in biopharma connectors and pumps, plastics and polymer processing, food retail, industrial pumps, refuse collection, and automotive-exposed markets in the first quarter of 2021. Backed by this momentum, the company projects revenues to register growth of 10-12% in 2021 compared with the earlier estimate of an 8-10% increase. Dover now expects adjusted earnings per share to lie between $6.75 and $6.85 for 2021, up from the prior projection of $6.25 and $6.45.

Segments Poised to Deliver Improved Results

In the Engineered Products segment, demand for engineered products, vehicle service and industrial automation remain strong. Aerospace and defense will gain from various government programs in 2021. Fueling Solutions continues to grow on productivity and pricing actions as well as constructive demand trends. Moreover, positive order trends in vehicle wash markets as well as systems and software recovery in underground businesses will drive the segment’s results this year. The Imaging & Identification segment will continue to gain from strong demand for consumables and fast-moving consumer goods solutions.

In the Pumps & Process Solutions segment, elevated demand for food and beverage, rapid recovery in industrial pumps and strong growth in biopharma and hygiene market are likely to be conducive to the segment’s performance in 2021. In the Refrigeration & Food Equipment segment, large backlog and high order rates in food retail business will drive results in 2021. Also, its heat exchanger and Belvac business is seeing strong order rates. Dover is investing in capacity and new capabilities in these two businesses to capture growth.

Focus on Cost Control & Acquisitions Bode Well

Dover’s productivity and cost-control initiatives continue to drive bottom-line growth. It executed restructuring programs to better align the costs and operations with current market conditions. The company has initiated several growth projects, and has started investments in can forming and heat exchanger businesses to capture growing volumes and upgrade competitive capabilities.

Dover has a long tradition of making successful acquisitions in diverse end markets. In first-quarter 2021, the company entered into an agreement with EdgePetrol Limited to acquire minority interest in the latter in a bid to expand its software solutions services to the global retail industry. This April, Dover acquired AvaLAN to expand long-term digitization trends in the fuel retail industry. Last year, Dover acquired Innovation Control Systems (ICS) and XanTec. The company made these acquisitions to complement and expand upon the existing operations within the Fueling Solutions and Pumps & Process Solutions segments.

Price Performance

Dover’s shares have gained 55.8% over the past year compared with the industry’s growth of 48.6%.


Zacks Rank & Other Stocks to Consider

Dover currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Other similarly-ranked stocks in the Industrial Products sector include Deere & Company (DE - Free Report) , Avery Dennison Corporation (AVY - Free Report) and Caterpillar Inc. (CAT - Free Report) .

Deere has a projected earnings growth rate of 84.2% for fiscal 2021. Shares of the company have soared 154.4% over the past year.

Avery Dennison has an estimated earnings growth rate of 20.8% for 2021. The company’s shares have rallied 112% in a year’s time.

Caterpillar has an expected earnings growth rate of 45.6% for the ongoing year. Over the past year, the stock has appreciated 131%.

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