Dover Corporation DOV has been benefiting from solid backlog levels and high booking rates due to strong end-market demand. This is impressive amid headwinds, such as input cost inflation and supply-chain issues. Savings from the company's productivity and cost-cutting initiatives are also aiding its results.
Let’s delve deeper and analyze the factors that make this Zacks Rank #3 (Hold) stock worth holding on to at present.
Solid Q1 Results: Dover reported first-quarter 2023 adjusted earnings per share (EPS) from continuing operations of $1.94, in line with the Zacks Consensus Estimate. The bottom line increased 2% year over year.
Positive Earnings Surprise History: DOV has an average trailing four-quarter earnings surprise of 1.5%.
Upbeat Growth Projections: The Zacks Consensus Estimate for the company’s 2023 earnings has moved 0.1% upward over the past 30 days and is pegged at $8.99 per share. It suggests growth of 6.4% from the year-ago reported figure.
The consensus mark for fiscal 2024 earnings stands at $9.75 per share, indicating a year-over-year improvement of 8.4%. The Zacks Consensus Estimate has moved up 0.3% over the past 30 days.
Upbeat FY23 Outlook: The company expects to generate adjusted EPS of $8.85-$9.05 for 2023, indicating 6% year-over-year growth at the mid-point. DOV anticipates organic revenue growth of 3-5% for the year.
Price Performance: Dover’s shares have gained 1.8% in the past year compared with the industry’s growth of 8.1%.
Image Source: Zacks Investment Research
Solid Backlog Levels & Volume Growth: Dover’s order backlogs remain healthy across most of its segments. This was driven by strong demand across the majority of the company’s business, and its ability to produce and ship despite several operating challenges.
The company’s margin is gaining from the strong volume, an improved price-cost spread and tight cost controls, offsetting the negative impacts of supply-chain constraints, input inflation and production disruptions. Solid new order intake continues to aid growth.
Strong Segment Performance: The Engineered Products segment is delivering organic growth across all businesses. Orders remain strong in waste handling, and aerospace & defense. A solid backlog and strong bookings will continue to support the segment’s top line.
The Clean Energy and Fueling segment will gain from solid growth in below-ground retail fueling, fuel transport vehicle wash and industrial gases, coupled with acquisitions in Clean Energy and components.
Given its backlog and pricing initiatives, Dover’s Climate and Sustainability Technologies segment is expected to post solid growth in the upcoming quarters. It is seeing strong demand conditions and top-line growth across all major business lines.
The global investment in sustainability continues to drive the demand for heat exchangers and CO2 refrigeration systems. The company’s margins will increase on improved productivity in food retail, strong volumes driving fixed-cost absorption and price-cost tailwinds.
Effective Growth Strategies: Dover will gain from product digitization, e-commerce, product development and inorganic investment in core business platforms. The company is focused on investments in capacity expansions in high-growth businesses and productivity improvements across its portfolio. Dover also has a long tradition of making successful acquisitions in diverse end markets
DOV executed restructuring programs to better align costs and operations with current market conditions through targeted facility consolidations, headcount reductions and other measures, which will support its margins.
Doveris bearing the brunt of input cost inflation and component shortages. This has negatively impacted shipment volumes across many of its businesses. The company expects unfavorable foreign currency impacts, supply-chain challenges and labor constraints to continue through the remainder of the current year.
Considering the ongoing macroeconomic uncertainty, Dover has decided to lower output in several businesses to draw down inventory balances. Meanwhile, the company will initiate cost-control measures wherever necessary.
Stocks to Consider
Some better-ranked stocks from the Industrial Products sector are Worthington Industries, Inc. WOR, The Manitowoc Company, Inc. MTW and Pentair plc PNR. WOR and MTW flaunt a Zacks Rank #1 (Strong Buy) at present, and PNR has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Worthington Industries has an average trailing four-quarter earnings surprise of 27.5%. The Zacks Consensus Estimate for WOR’s fiscal 2023 earnings is pegged at $4.93 per share. The consensus estimate for 2023 earnings has moved north by 17.7% in the past 60 days. Its shares gained 23.3% in the last year.
Manitowoc has an average trailing four-quarter earnings surprise of 38.8%. The Zacks Consensus Estimate for MTW’s 2023 earnings is pegged at 85 cents per share. The consensus estimate for 2023 earnings has moved 63.5% north in the past 60 days. MTW’s shares gained 15.4% in the last year.
The Zacks Consensus Estimate for Pentair’s 2023 earnings per share is pegged at $3.66, up 3% in the past 60 days. It has a trailing four-quarter average earnings surprise of 7.2%. PNR has gained 14.4% in the last year.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report