On Oct 6, 2016, Zacks Investment Research downgraded Dover Corporation (DOV - Analyst Report) to a Zacks Rank #3 (Hold). Going by the Zacks model, stocks carrying a Zacks Rank #3 are likely to perform in line with the broader market in the quarters ahead.
Why the Downgrade?
During its second-quarter conference call, Dover narrowed its 2016 earnings per share guidance range to $3.42–$3.52 (excluding one-time items), reflecting the impact of a reduced full-year revenue forecast and adjusting for deal cost and one-time items. The company expects full-year 2016 revenue to drop 3%–5%, compared to the prior forecast of a 2%–5% decline.
The guidance cut came on the back of a delay in project timing and persistent softness in oil and gas related markets. Dover expects its industrial platform revenue in second-half 2016 to be similar to the first half. Further, the Fluids segment’s decline in organic revenue will be more than offset by growth from acquisitions. The company lowered the high end of its organic revenue guidance range as a result of consistent soft markets.
The company also reduced the growth rate for Tokheim as China activity and volume in other emerging markets are anticipated to remain weak in the back half of the year. Within Refrigeration and Food Equipment, Dover trimmed the high end of its full-year forecast for organic revenue growth.
Additionally, Dover’s bookings at the end of the second quarter fell roughly 1.6% year over year. Backlog also declined to $1.09 billion at the end of the reported quarter, from $1.16 billion at year-ago quarter end. This does not augur well for the company’s third-quarter 2016 performance.
Nevertheless, Dover stands to gain from solid growth from the industrial, hygienic and pharma markets. Within Refrigeration and Food Equipment, Dover’s plans for organic revenue growth and margin improvement remain on track heading into the seasonally strong third quarter. Moreover, Dover's recent acquisition of Ravaglioli as well as the divestment of its Tipper Tie unit will bolster its business in key markets.
Stocks to Consider
Some better-ranked stocks in the machinery-general industrial industry include DXP Enterprises, Inc. (DXPE - Snapshot Report) , Nordson Corporation (NDSN - Snapshot Report) and Middleby Corp. (MIDD - Analyst Report) .
DXP Enterprises has witnessed solid estimate revisions of 1500% over the past 60 days. The stock sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Nordson Corporation, also a Zacks Rank #1 stock, has seen upward estimate revisions of around 7% over the past 60 days.
Middleby, which carries a Zacks Rank #2 (Buy), has seen upward estimate revisions of 5% over the last 60 days.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>