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It has been about a month since the last earnings report for Dover Corporation (DOV). Shares have added about 3.9% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Dover Corporation due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Dover Q3 Earnings Beat Estimates, Raises '21 View
Dover reported third-quarter 2021 adjusted earnings per share from continuing operations of $1.98, which beat the Zacks Consensus Estimate of $1.85. The bottom line improved 24% year over year on the back of higher revenues and new order growth across all five of its operating segments.
On a reported basis, Dover delivered earnings per share of $1.81 in the quarter, indicating year-over-year growth of 31%.
Total revenues in the third quarter increased 15% year over year to $2,018 million. The top line surpassed the Zacks Consensus Estimate of $1,995 million.
Costs and Margins
Cost of sales rose 16% year over year to $1,264 million in the reported quarter. Gross profit increased 15% year over year to $755 million. Gross margin was 37.4% compared with the year-ago quarter’s 37.7%.
Selling, general and administrative expenses were up 8% to $412.6 million from the prior-year quarter. Adjusted operating profit increased 20% year over year to $382 million. Adjusted operating margin was 19% in the quarter compared with the prior-year quarter’s 18.2%.
The Engineered Products segment revenues were up 16% year over year to $448 million in the quarter. The segment’s adjusted operating income declined 5.8% year over year to $63 million.
The Fueling Solutions segment revenues climbed 8% to $411 million from the year-earlier quarter’s $380 million. The segment’s adjusted operating income was $67.2 million, down 1.5% year over year.
The Imaging & Identification segment revenues increased 10% year over year to $292 million. The segment’s adjusted operating income surged 24% year over year to $65 million.
The Pumps & Process Solutions revenues grew 26% year over year to $438 million in the third quarter. The adjusted operating income for the segment totaled $142.9 million compared with the year-ago quarter’s $91.6 million.
The Refrigeration & Food Equipment segment’s revenues increased to $429 million from $368 million reported in the year-earlier quarter. The segment’s adjusted operating income totaled $44 million compared with $40 million in the third quarter of 2020.
Bookings and Backlog
Dover’s bookings at the end of the third quarter were worth $2.29 billion compared with the prior-year quarter’s $1.8 billion. Backlog surged 79% year over year to $2.83 billion at the end of the reported quarter.
The company generated free cash flow of $303 million in the third quarter compared with $295 million in the year-ago quarter. Cash flow from operations amounted to $351 million in the quarter under review compared with the prior-year quarter’s $339 million.
Dover recently completed three highly-complementary bolt-on acquisitions in radio signal intelligence solutions, industrial 3D visualization software and fueling solutions for alternative fuels like LNG and hydrogen. It has agreed to sell Unified Brands, which is part of Dover's Refrigeration & Food Equipment segment. This move will help Dover focus on its core growth platforms.
Backed by the current demand scenario and high backlog levels, the company raised its adjusted earnings per share guidance for the current year. Dover now anticipates adjusted EPS between $7.45 and $7.50, up from the prior projection of $7.30 and $7.40.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
At this time, Dover Corporation has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Dover Corporation has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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