Dover (DOV) Q2 Earnings Beat, Up Y/Y, '17 Guidance Raised

Dover Corporation (NYSE:DOV) reported second-quarter 2017 earnings per share from continuing operations of $1.04, which surged 37% from 76 cents recorded in the prior-year quarter. Earnings also beat the Zacks Consensus Estimate of $1.00.

Total revenue increased 18% year over year to $1.993 billion in the quarter, which came ahead of the Zacks Consensus Estimate of $1.942 billion. The year-over-year increase was driven by acquisition growth of 12% and organic growth of 10%, partly offset by a 3% impact from dispositions, and an unfavorable impact from foreign exchange of 1%.

Costs and Margins

Cost of sales increased 17.9% year over year to $1.24 billion in the reported quarter. Gross profit rose 18.7% year over year to $749.4 million and subsequently gross margin expanded 20 basis points (bps) to 37.6%.

Selling, general and administrative expenses increased to $484 million from $437.4 million recorded in the prior-year quarter. Operating profit jumped 36.9% to $265.4 million from $193.8 million in the year-ago quarter. Operating margin expanded 180 bps to 13.3%.

Segmental Performance

Energy revenues climbed 38.7% year over year to $359 million in the quarter. The segment reported an operating profit of $53.4 million compared to a loss of $0.75 million recorded in the comparable period last year.

Revenues in the Engineered Systems segment increased to $655.4 million from $592.4 million recorded in the year-earlier quarter. The segment’s income increased 2.7% year over year to $106.8 million.

Revenues in the Fluids segment jumped 36% year over year to $553.3 million in the reported quarter. The segment’s income rose 36% year over year to $73.6 million.

The Refrigeration & Food Equipment segment’s revenues edged down 0.7% to $426.3 million from $429.4 million recorded in the prior-year quarter. The segment reported an operating income of $65.8 million, up from $63.2 million in the year-earlier period.

Bookings and Backlog

Dover’s bookings at the end of the second quarter were worth $2.02 billion, up from $1.69 billion at the end of second-quarter 2016. Backlog also increased to $1.33 billion at the end of the reported quarter from $1.09 billion at the year-ago quarter end.

Financial Position

Dover generated free cash flow of $150.5 million in the quarter under review compared with $172.9 million in the prior-year quarter. Cash flow from operations came in at $155.9 million in the reported quarter compared with $207.9 million in the year-ago quarter.

Outlook

Dover raised its revenue and EPS guidance for full-year 2017, driven by solid second-quarter performance. The company now guides adjusted earnings per share in range of $4.23–$4.33, up from the prior band $4.05–$4.20 for 2017. The company also expects its full-year revenues to grow in the range of 12–14% compared with the previous outlook of 11–13%.

The revenue growth guidance comprised organic growth of 5–7% and acquisition growth of approximately 10%, partially offset by a 2% impact from the dispositions and a 1% headwind from foreign exchange.

Share Price Performance

Over the last one year, Dover underperformed the Zacks classified Machinery - General Industrial sub-industry with respect to price performance. The stock gained 18.5%, while the industry recorded growth of 30.6% over the same time frame.

Zacks Rank

Dover currently carries a Zacks Rank #2 (Buy).

Other top-ranked companies in the same sector are AGCO Corporation (NYSE:AGCO) , Apogee Enterprises, Inc. (NASDAQ:APOG) and Cimpress N.V. (NASDAQ:CMPR) , all three sporting a Zacks Rank #1 (Strong Buy). You can see tthe complete list of today’s Zacks #1 Rank stocks here.

AGCO has expected long-term growth rate of 12.41%.

Apogee has expected long-term growth rate of 12.50%.

Cimpress has expected long-term growth rate of 17.50%.

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