We reiterate our Neutral recommendation on Dover Corporation (DOV), which specializes in industrial products and manufacturing equipment in U.S. and has subsidiaries and affiliates in Canada, France, Germany, the Netherlands, Sweden, China and the United Kingdom.
Dover released its fourth quarter and fiscal 2011 financial results on January 25, 2012. The company reported earnings of $1.07 per share, outperforming the Zacks Consensus Estimate of $1.03 per share.
Results were 19% above the year-ago earnings. Total revenues were $2.0 billion, improving 15% year over year. Revenues were almost in line with the Zacks Consensus Estimate of $2.01 billion.
Dover expects to deliver earnings in the band of $4.70-$5.00 per share in 2012. The Zacks consensus Estimate is pegged at $4.87 per share.
Dover continues its strategy of growing through acquisitions to improve its product offering and complement its organic growth strategy. In 2011, Dover invested about $1.4 billion to acquire nine businesses within its targeted markets of Communication Components, Fluid, Refrigeration & Industrial, Energy, Printing and Identification.
Recently, Dover acquired the Maag Group, a leader in the external gear pump technology and engineered solutions. The Maag Group is fitted into the Downers Grove of Pump Solutions Group (PSG) within the Fluid Solutions platform of Engineered Solution segment. Dover expects to improve Fluid’s position by increasing Pump Solution Group’s product portfolio and technology in the chemicals and petrochemical markets.
Dover in the last quarter of 2011 realigned its businesses into a new segment structure in order to match the target growth markets. This attempt to restructure places Dover in a better position to reap benefits for the long term.
Dover has a significant exposure to the volatile semiconductor and electronics end-markets through its Electronics Technologies platform. Uncertainty in the economy impacting consumers’ spending may affect the semiconductor market.
The Energy segment remains a concern for the company due to the volatility of energy prices as well as uncertainty regarding the rig count growth in 2012. Moreover, the drilling and extraction of oil or natural gas also become difficult due to the scarcity of readily available resources.
The shares of Dover hold a Zacks #3 Rank in the short term, which implies a Hold rating. It competes with the companies like Cooper Industries plc(CBE), Ingersoll-Rand Plc (IR) and Weatherford International Ltd. (WFT).
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