Why Is Dover (DOV) Up 4.3% Since The Last Earnings Report?

It has been about a month since the last earnings report for Dover Corporation (NYSE:DOV) . Shares have added about 4.3% in that time frame, outperforming the market.

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

Dover Tops Q1 Earnings & Revenues, Raises '17 View

Dover reported first-quarter 2017 adjusted earnings per share from continuing operations of $0.70, which increased 25% from $0.56 recorded in the prior-year quarter. Earnings also beat the Zacks Consensus Estimate of $0.62.

Including one-time items, earnings came in at $1.09 per share, up from the prior-year figure of $0.64.

Total revenue increased 11.8% year over year to $1.813 billion in the quarter, which came ahead of the Zacks Consensus Estimate of $1.770 billion. The year-over-year increase was driven by acquisition growth of 12% and organic growth of 4%, partly offset by a 3% impact from dispositions, and an unfavorable impact from foreign exchange of 1%.

Costs and Margins

Cost of sales increased 11.5% year over year to $1.15 billion in the reported quarter. Gross profit rose 12% year over year to $661 million and subsequently gross margin expanded 20 basis points (bps) to 36.5%.

Selling, general and administrative expenses increased to $485.3 million from $443.4 million in the prior-year quarter. Operating profit grew 20.6% to $175.9 million from $145.8 million in the year-ago quarter. Operating margin expanded 70 bps to 9.7%.

Segmental Performance

Energy revenues climbed 14% year over year to $324 million in the quarter. The segment reported an operating profit of $41.7 million, significantly up from $11.2 million recorded in the comparable period last year.

Revenues in the Engineered Systems segment increased to $607.6 million from $577 million in the year-ago quarter. The segment’s income surged 86% year over year to $174.4 million.

Revenues in the Fluids segment jumped 31.6% year over year to $525 million in the reported quarter. The segment’s income rose 14% year over year to $52.6million.

The Refrigeration & Food Equipment segment’s revenues edged down 1.8% to $356.8 million from $363.3 million recorded in the prior-year quarter. The segment reported an operating income of $33.6 million, down from $38.2 million in the year-earlier period.

Bookings and Backlog

Dover’s bookings at the end of the first quarter were worth $2.03 billion, up from $1.68 billion at the end of first-quarter 2016. Backlog also increased to $1.29 billion at the end of the reported quarter from $1.07 billion at the end of the year-ago quarter.

Financial Position

Dover generated free cash flow of $35.8 million in the first quarter compared with $96.2 million in the prior-year quarter. Cash flow from operations came in at $78.1 million in the reported quarter compared with $133.4 million in the year-ago quarter.

Outlook

Dover raised its revenue and EPS guidance for full-year 2017, driven by solid first-quarter performance, higher expectations in the Energy segment, and overall strong bookings activity. The company now guides earnings per share in range of $4.05–$4.20, up from the prior band of $3.40–$3.60 (excluding one-time items) for 2017.

The company also anticipates full-year revenue growth in the range of 11–13% compared with the previous outlook of 10–12%. The revised revenue forecast is primarily driven by a one-point increase in organic growth. The revenue growth guidance comprises organic growth of 4–6% and acquisition growth of approximately 10%, partially offset by a 2% impact from the dispositions and a 1% headwind from foreign exchange.

How Have Estimates Been Moving Since Then?

Following the release, investors have witnessed an upward trend in fresh estimates. There have been six revisions higher for the current quarter compared to one lower. In the past month, the consensus estimate has moved up by 5.9% due to these changes.

Dover Corporation Price and Consensus

VGM Scores

At this time, Dover's stock has an average score of 'C' on both growth and momentum front. Following the exact same course, 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.

Based on our scores, the stock is equally suitable for value, growth, and momentum investors.

Outlook

Estimates have been trending upward for the stock. The magnitude of these revisions also looks promising. The stock has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.