Dover Does It All — And Does It Well

5/30/2011


  Recent Price
$63
  Dividend
$1.10
  Yield
1.8%
  P/E Ratio
16
  Shares (millions)
190
  Long-Term Debt as % of Capital
32%
  52-Week Price Range
$69.25 - $40.50

Diversified manufacturer Dover's ($63; DOV) revenue climbed 26% over the past year, while free cash flow jumped 30%. The confluence of strong pricing, higher volumes, and a more profitable product mix should help Dover keep grinding out growth.

Dover's 2011 guidance, raised in April, targets per-share profits of $4.30 to $4.45, implying growth of 24% to 28%. The company projects organic revenue growth of 9% to 11%, with an additional 3% growth from acquisitions. And free cash flow should reach record levels, rising at least 42%. Dover, a bona fide growth company that plays in dozens of different pools, is a Buy and a Long-Term Buy.

Business breakdown

Dover's March-quarter sales surged 24% on higher volumes across all four operating segments. Each segment serves a number of end markets.

Engineered systems (31% of 2010 revenue, 26% of earnings from continuing operations). The unit is split into two divisions: engineered products (60% of segment revenue) and product identification (40%). Engineered products designs refrigeration systems, foodservice machines, and equipment to manufacture beverage cans and package meat. Product identification provides industrial marking and coding systems that print date codes and serial numbers.

Industrial products (26%, 19%). Within Dover's industrial segment, mobile equipment (54% of segment revenue) makes products ranging from tank trailers and vehicle lifts to compactors and car-wash systems. Material handling (46%) products include construction equipment, electronic controls for cranes, and components for military vehicles.

Fluid management (23%, 33%). The energy-products division (54% of segment revenue) helps customers extract, store, and move oil and gas products. The fluid-solutions business (46%) makes pumps, compressors, and products that transfer and measure liquid and dry commodities.

Electronic technologies (20%, 21%). The unit makes electronic devices for testing and manufacturing circuit boards and semiconductors. It also produces components used in hearing aids, medical devices, and military headsets.

Dover fills out its product portfolio with acquisitions in markets where it already has an established expertise. Since the start of 2008, the company has made 20 purchases for a total of nearly $900 million.

Dover's customer base is as broad as its product portfolio, with no single customer accounting for more than 10% of revenue. The company continues to push into emerging markets.

Conclusion

At 16 times trailing earnings, the shares trade at a 7% premium to their five-year average P/E ratio of 15 but 13% below the average industrial-machinery stock in the S&P 1500 Index. If Dover earns the $4.99 per share Wall Street expects in 2012 and reverts to its five-year average P/E ratio, the stock would be worth $76.

Yielding 1.8%, Dover has increased its dividend for 55 consecutive years. An annual report for Dover Corp. is available at 3005 Highland Parkway, Suite 200, Downers Grove, IL 60515; (630) 541-1540; www.dovercorporation.com.

 

DOVER
Quarter
Per-Share Earnings*
($)
Sales
Change
Quarterly
Price Range
($)
P/E Ratio
Range
Mar '11
0.96
vs.
0.65
+ 24%
68.07
-
56.51
20 - 16
Dec '10
0.94
vs.
0.55
+ 24%
59.20
-
51.39
19 - 17
Sep '10
0.98
vs.
0.58
+ 26%
53.00
-
40.50
20 - 15
Jun '10
0.91
vs.
0.54
+ 29%
55.50
-
41.42
24 - 18
Year
(Dec.)
Sales
 ($Bil.)
Per-Share
Earnings*
($)
Per-Share
Dividend
($)
52-Week
Price Range
($)
P/E Ratio
Range
2010
7.13
3.48
1.08
59.20
-
40.50
17 - 12
2009
5.78
2.00
1.02
43.10
-
21.79
22 - 11
2008
7.57
3.67
0.90
54.57
-
23.39
15 - 6
2007
7.23
3.22
0.77
54.59
-
44.34
17 - 14
 
Quadrix Scores †
Overall
Momen-
tum
Value
Quality
Financial
Strength
Earnings
Estimates
Performance
94
93
67
80
59
92
56

   * Earnings exclude special items.
   † Quadrix® scores are percentile ranks, with 100 the best.


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