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Dover (DOV) Hits 52-Week High: What's Driving the Rally?

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Shares of Dover Corporation (DOV - Free Report) scaled a fresh 52-week high of $174.58 during the trading session on Aug 24, before retracting a bit to close at $174.23. The company’s forecast-beating second-quarter 2021 results, upbeat outlook for the full year, solid end-market demand across all segments, strong order trends, as well as cost-control actions are driving the stock performance.

Dover’s shares have gained 39% so far this year, outperforming the industry’s growth of 9.9%.

Zacks Investment Research
Image Source: Zacks Investment Research

The company delivered adjusted earnings of $2.06 per share in the second quarter, beating the Zacks Consensus Estimate of $1.84. Revenues of $2,032 million also surpassed the consensus mark of $1,900 million. Dover has a trailing four-quarter earnings surprise of 17.6%, on average.

Driving Factors

Dover has been gaining from robust order trends across majority of its businesses, lately. Order trends were particularly strong in pumps and process solutions, fueling solutions, food retail, marking & coding and automotive aftermarket businesses during the June-end quarter. Backed by this momentum, the company projects sales growth of 15-17% in 2021 compared with the earlier estimate of a 10-12% increase. Dover now estimates adjusted earnings per share to lie between $7.30 and $7.40 for 2021, up from the prior projection of $6.75 and $6.85.

In the Engineered Products segment, demand for engineered products, vehicle service and industrial automation has been solid. Fueling Solutions continues to grow on robust increase in systems and software, recovering underground demand and vehicle wash. These are likely to offset some headwinds from the EMV roll-off. The Imaging & Identification segment will benefit from strong demand for consumables and fast-moving consumer goods solutions. Marking & coding business is expected to maintain its growth trajectory with services and serialization products. Digital textile printing is recovering from the pandemic-induced declines seen in the past year.

In the Pumps & Process Solutions business, demand for biopharma connectors and pumps will likely be healthy, aided by vaccine and non-COVID-related pharmaceutical tailwinds. Dover’s Refrigeration & Food Equipment, heat exchanger as well as the Belvac business will perform well for the remaining period of the current year, given the large backlog and strong order rates in the food retail business. Dover is investing in capacity and new capabilities in these two businesses to capture growth.

Dover’s productivity and cost-control initiatives will continue to drive bottom-line growth. It executed restructuring programs to better align the costs and operations with current market conditions. The company is focused on investments in capacity expansions in high-growth businesses and productivity improvements across its portfolio. Also, Dover has a long tradition of making successful acquisitions in diverse end markets. Its efforts to reduce debt levels, solid financial position, prudent capital structure, refinancing efforts and momentum in operational execution bode well.

Positive Growth Projections

The Zacks Consensus Estimate for the company’s 2021 earnings is currently pegged at $7.52, suggesting year-over-year growth of 32.6%.

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 top-ranked stocks in the Industrial Products sector include Encore Wire Corporation (WIRE - Free Report) , Lincoln Electric Holdings, Inc. (LECO - Free Report) and Lindsay Corporation (LNN - Free Report) . While Encore Wire sports a Zacks Rank #1, Lincoln Electric and Lindsay carry a Zacks Rank #2, at present.

Encore Wire has a projected earnings growth rate of 332.6% for fiscal 2021. So far this year, the company’s shares have gained 45%.

Lincoln Electric has an expected earnings growth rate of 45.1% for 2021. The stock has appreciated 22%, year to date.

Lindsay has an estimated earnings growth rate of 17.4% for fiscal 2021. The company’s shares have gained 35%, so far this year.