Dover Corporation (NYSE:DOV) DOV is benefiting from solid end-market demand across all segments and strong order trends, which are likely to drive strong revenue growth. Anticipated benefits from cost-reduction actions, focus on investments and acquisitions, as well as efforts to reduce debt levels will stoke growth.
Dover currently carries a Zacks Rank #3 (Hold) and has a VGM Score of B. Our research shows that stocks with a VGM Score of A or B, when combined with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3, offer the best investment opportunities. You can see the complete list of today’s Zacks #1 Rank stocks here.
Price Performance: Dover’s shares have gained 27.5% so far this year, outperforming the industry’s growth of 5.9%.
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Upbeat Outlook: Dover estimates adjusted earnings per share to lie between $7.30 and $7.40 for 2021, indicating year-over-year growth of 43.5% at mid-point.
Positive Growth Expectations: The Zacks Consensus Estimate for the company’s earnings per share for 2021 is currently pegged at $7.52, indicating year-over-year growth of 32.6%. The same for 2022 stands at $8.12, which suggests year-over-year improvement of 8%.
Positive Earnings Surprise History: Dover has a trailing four-quarter earnings surprise of 17.6%, on average.
Superior Return on Assets: Dover currently has a Return on Assets (“ROA”) of 11%, higher than the industry’s 8%. An above-average ROA denotes that the company is generating earnings by effectively managing its assets.
Return on Equity: Dover’s trailing 12-month ROE supports its growth potential. The company’s ROE of 29.4% compares favorably with the industry’s average ROE of 19.4%, reflecting that it is more efficient in utilizing shareholders’ funds.
Underpriced Stock: Looking at Dover’s price-to-earnings ratio, shares are underpriced at the current level, which seems to be attractive for investors. The company has a trailing P/E ratio of 22.7, which is below the industry average of 27.3.
Growth Drivers in Place
Dover has lately been gaining from robust order trends across the majority of its businesses. Order trends are particularly strong in pumps and process solutions, fueling solutions, food retail, marking & coding, and automotive aftermarket businesses.
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. The Imaging & Identification segment will benefit from strong demand for consumables and fast-moving consumer goods solutions. The 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 are poised to 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 increasing capacity and new capabilities in these two businesses in order to capture growth.
Dover’s productivity and cost-control initiatives will continue to drive bottom-line growth. It executed restructuring programs to better align 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.
Meanwhile, raw material cost inflation, labor shortages and supply chain constraints are likely to unfavorably impact the company’s results.
Stocks to Consider
Better-ranked stocks in the Industrial Products sector include Deere (NYSE:DE) & Company DE, Alcoa (NYSE:AA) Corporation AA and AGCO Corporation AGCO. While Deere and Alcoa flaunt a Zacks Rank #1, AGCO carries a Zacks Rank of 2 at present.
Deere has a projected earnings growth rate of 117.5% for fiscal 2021. So far this year, the company’s shares have gained 32.2%.
Alcoa has an estimated earnings growth rate of 573.2% for 2021. The company’s shares have rallied 121.2%, so far this year.
AGCO has an expected earnings growth rate of 70.7% for 2021. The stock has appreciated 27.1%, year to date.
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