Dover Corp. (DOV) reported its first quarter 2012 earnings with an EPS of $1.05, outperforming the Zacks Consensus Estimate of $1.01. Results were 19% above the year-ago earnings of 88 cents per share.
Including gains from discrete and other tax items, reported earnings in the prior year quarter came in at 92 cents per share. Compared to this, EPS in the current reported quarter posted a climb of 14%.
Operational Update
Total revenue was $2.06 billion, improving 14% year over year, surpassing the Zacks Consensus Estimate of $1.99 billion. The revenue increase included an organic growth of 9%, reflecting strength in energy, refrigeration and food equipment, handsets, fluids and industrial end-markets. .
Dover reported cost of sales of $1.28 billion versus $1.1 billion in the year-ago quarter. Gross profit of the company increased 10% year over year to $780 million in the quarter. However, gross margin contracted 150 basis points to 37.8% in the quarter.
Selling and administrative expenses also increased to $481 million in the reported quarter versus $453 million in the year-ago quarter. Operating profit soared to $299 million in the reported quarter versus $258 million in the prior-year quarter. Operating margin was 14.5%, a 20 bais point improvement over the prior year quarter.
Segmental Performance
Revenue in the Communication Technologies segment shot up to $357 million from $268 million in the prior-year quarter. The segment’s income, however, dipped 2% to $46.5 million from $47.3 million in the prior-year quarter, and operating margin contracted 460 basis points year over year to 13%.
Energy reported total revenue of $531.5 million in the quarter under review compared with $425.4 million in the year-ago quarter. The segment’s operating income increased 42% to $132 million from $93 million in the year-earlier quarter. The segment’s margin expanded 300 basis points year over year to 24.9% in the reported quarter.
Net sales in Engineered Systems segment increased to $822 million in the quarter from $723 million in the year-ago quarter. The segment’s income surged to $122 million from $98 million in the year-earlier quarter. Operating margin of the segment expanded 130 basis points year over year to 14.9%.
Total revenue of Printing & Identification segment fell to $352 million from $395 million in the prior-year quarter. The segment reported operating income of $32.6 million, down 40% from $54.6 million in the last-year’s quarter, contracting the operating margin by 450 basis points year over year to 9.3%.
Bookings and Backlog
The company ended the first quarter with $2.18 billion worth of bookings versus $2 billion at the end of the fourth quarter 2011. Backlog of the company increased to $1.7 billion at quarter end from $1.45 billion at fourth quarter 2011.
Free Cash Flow & Acquisition
Dover generated free cash flow of $88.7 million in the reported quarter compared with $66.1 million in the year ago quarter. Recently, Dover completed the acquisition of the global manufacturer of pump gears, pelletizers and filtration systems; Maag Group. The transaction value of the deal was nearly $285 million.
Outlook
Dover expects full-year 2012 revenue growth of 10-12%, representing an organic revenue growth of 5-7%, and 5% growth from acquisitions. Dover expects to deliver earnings in the band of $4.80-$5.00 per share in 2012, up from the previous guided range of $4.70 to $5.00 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.
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 quantitative Zacks #2 Rank (short-term Buy rating) for the company indicates indicates slight upward pressure on the stock over the near term
Dover Corporation is an industrial conglomerate producing a wide range of specialized industrial products and manufacturing equipment. It operates primarily in the U.S. and has subsidiaries and affiliates in Canada, France, Germany, the Netherlands, Sweden, China and the United Kingdom. Dover caters to a diverse clientele primarily spread across the Americas, Europe and Asia. Dover competes with the likes of Cooper Industries plc (CBE), Ingersoll-Rand Plc (IR), and Weatherford International Ltd. (WFT).
