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Dover Corporation (DOV) Up 6.5% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Dover Corporation (DOV - Free Report) . Shares have added about 6.5% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Dover Corporation due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Dover Meets Q3 Earnings Estimates, Lowers 2023 View

Dover reported third-quarter 2023 adjusted earnings per share (EPS) from continuing operations of $2.35, in line with the Zacks Consensus Estimate. The bottom line increased 4% year over year aided by the company’s cost-containment actions. Also, improved productivity and disciplined pricing helped offset the impact of offset negative product mix on earnings.

On a reported basis, Dover delivered EPS of $2.06 in the quarter, up 3% year over year.

Total revenues in the third quarter were $2,153 million, flat compared with the year-ago quarter. The top line missed the Zacks Consensus Estimate of $2,216 million. Organic growth was a negative 2% in the quarter.

Costs and Margins

The cost of sales fell 1.8% year over year to $1,360 million in the reported quarter. Gross profit was up 2.6% year over year to $793 million. The gross margin was 36.8% compared with the year-ago quarter’s 35.8%.

Selling, general and administrative expenses were up 4.5% to $420 million from the prior-year quarter. Adjusted EBITDA rose 2.4% year over year to $504 million. The adjusted EBITDA margin was 23.4% in the quarter compared with the prior-year quarter’s 22.8%.

Segment Performances

The Engineered Products segment’s revenues were down 2.49% year over year to $504 million in the quarter. The reported figure fell short of our expectation of $531 million. The segment’s adjusted EBITDA increased 12% year over year to $109 million. The figure beat our estimate of $100 million.

The Clean Energy & Fueling segment’s revenues were $467 million compared with the prior-year quarter’s $464 million. The figure beat our estimate of $435 million. The segment’s adjusted EBITDA was $100 million, up from the prior-year quarter’s $97 million. The figure topped our estimate of $89 million.

The Imaging & Identification segment’s revenues moved down 2% year over year to $276 million. The reported figure fell short of our expectation of $292 million. The segment’s adjusted EBITDA was $74 million, down from the year-ago quarter’s $78 million. The figure missed our estimate of $75 million.

The Pumps & Process Solutions segment’s revenues dipped 0.5% year over year to $431 million in the third quarter and also missed our estimate of $459 million. The adjusted EBITDA of the segment totaled $130 million, down 6% from the year-ago quarter’s $139 million. The reported figure came in lower than our projection of $152 million.

The Climate & Sustainability Technologies segment’s revenues increased 3% to $476 million from the $463 million reported in the year-earlier quarter. We had predicted revenues to be $496 million for this segment. The segment’s adjusted EBITDA totaled $91 million compared with $82 million in third-quarter 2022. The figure was higher than our estimate of $88 million.

Bookings and Backlog

Dover’s bookings at the end of the third quarter were worth $2.01 billion compared with the prior-year quarter’s $2.06 billion. Total booking was higher than our estimate of $1.99 billion.

Backlog fell 16% year over year to $2.65 billion at the end of the reported quarter. Our model projected a backlog worth $3.09 billion.

Financial Position

The company had a free cash inflow of $340 million in the third quarter compared with the year-ago quarter’s $199 million. Cash flow from operations amounted to $383 million in the quarter under review compared with the prior-year quarter’s $265 million.

Outlook

Dover expects to generate an adjusted EPS of $8.75 to $8.85, which is lower than its previously stated range of $8.85 to $9.00 in 2023. DOV now anticipates flat revenue growth for the year. The company had earlier expected revenue growth of 2% to 4%.

Dover trimmed its guidance for the year to reflect certain challenging market conditions. Biopharma demand and the curtailment of automotive production will remain headwinds for the balance of the year. The company also expects higher transaction and integration costs due to the abovementioned portfolio moves and ongoing pipeline activity. The higher carrying costs of channel inventory, driven by higher interest rates, will continue to impact volumes in several end markets in the near term.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision.

VGM Scores

Currently, Dover Corporation has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Dover Corporation has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.


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