Annual Dividend Rate
$1.68 Annual Dividend Yield2.33% Beta1.38 Market Capitalization$11.2 Billion 52-Week Range$50.91-$73.97 Price as of 6/9/2016$72.08 Sector: Industrials Sub-Industry: Industrial Machinery Source: S&P
DOV BUSINESS DESCRIPTION
Dover Corporation manufactures and sells a range of equipment and components, specialty systems, and support services in the United States and internationally. The company operates in four segments: Energy, Engineered Systems, Fluids, and Refrigeration & Food Equipment.
STOCK PERFORMANCE (%)
3 Mo. 1 Yr. 3 Yr (Ann)
Price Change 16.05 -0.46 -3.22
GROWTH (%)
Last Qtr 12 Mo. 3 Yr CAGR
Revenues -5.44 -10.47 -4.64
Net Income -52.58 -7.88 -2.71
EPS -11.12 -15.64 -6.44
RETURN ON EQUITY (%)
DOV Ind Avg S&P 500
Q1 2016 15.63 18.62 11.95 Q1 2015 20.26 23.28 14.20 Q1 2014 21.35 18.95 14.48 P/E COMPARISON 19.64 DOV 24.54 Ind Avg 24.45 S&P 500 EPS ANALYSIS¹ ($) 2016 Q 1 0. 64 2015 Q 4 0. 87 Q 3 1. 19 Q 2 0. 97 Q 1 0. 72 2014 Q 4 1. 03 Q 3 1. 35 Q 2 1. 25 Q 1 0. 99
NA = not available NM = not meaningful
1 Compustat fiscal year convention is used for all fundamental data items.
Weekly Price: (US$) SMA (50) SMA (100) 1 Year 2 Years
2015 2016 50 55 60 65 70 75 80 85 90 95 TARGET PRICE $83.25
TARGET PRICE $83.25TARGET PRICE $83.25
TARGET PRICE $83.25TARGET PRICE $83.25
Rating History BUY HOLD 0 10 20 Volume in Millions
COMPUSTAT for Price and Volume, TheStreet Ratings, Inc. for Rating History
RECOMMENDATION
We rate DOVER CORP (DOV) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its expanding profit margins and largely solid financial position with reasonable debt levels by most measures. We feel its strengths outweigh the fact that the company has had somewhat weak growth in earnings per share. HIGHLIGHTS
42.15% is the gross profit margin for DOVER CORP which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 6.12% is above that of the industry average.
The debt-to-equity ratio is somewhat low, currently at 0.82, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.86 is somewhat weak and could be cause for future problems.
Regardless of the drop in revenue, the company managed to outperform against the industry average of 12.7%. Since the same quarter one year prior, revenues slightly dropped by 5.4%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
After a year of stock price fluctuations, the net result is that DOV's price has not changed very much. Although its weak earnings growth may have played a role in this flat result, don't lose sight of the fact that the performance of the overall market, as measured by the S&P 500 Index, was essentially similar. Looking ahead, although the push and pull of the overall market trend could certainly make a critical difference, we do not see any strong reason stemming from the company's fundamentals that would cause a continuation of last year's decline. In fact, the stock is now selling for less than others in its industry in relation to its current earnings.
The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Machinery industry and
PEER GROUP ANALYSIS
REVENUE GROWTH AND EBITDA MARGIN*
EBITDA Margin (TTM) R ev en ue G ro w th (T TM ) -1 5% 20 % 26% 10% FA VO RA BLE UN FA VO RA BLE SNA SNASNA SNA SNA XYL XYLXYL XYL XYL MIDD MIDDMIDD MIDD MIDD FLS FLS FLS
FLSFLS ITWITWITWITWITW
SWK SWKSWK SWK SWK SWH SWHSWH SWH SWH IR IR IR IRIR PH PH PH PHPH PNR PNR PNR PNRPNR DOV DOV DOV DOV DOV
Companies with higher EBITDA margins and revenue growth rates are outperforming companies with lower EBITDA margins and revenue growth rates. Companies for this scatter plot have a market capitalization between $6.8 Billion and $39.1 Billion. Companies with NA or NM values do not appear.
*EBITDA – Earnings Before Interest, Taxes, Depreciation and Amortization.
REVENUE GROWTH AND EARNINGS YIELD
Earnings Yield (TTM) R ev en ue G ro w th (T TM ) -1 5% 20 % 6% -1% FA VO RA BLE UN FA VO RA BLE SNA SNA SNA SNA SNA XYL XYLXYL XYL XYL MIDD MIDDMIDD MIDD MIDD FLS FLS FLS
FLSFLS ITWITWITWITWITW
SWK SWK SWK SWKSWK SWH SWHSWH SWH SWH IR IR IR IR IR PH PH PH PHPH PNR PNRPNR PNR PNR DOV DOV DOV DOV DOV
Companies that exhibit both a high earnings yield and high revenue growth are generally more attractive than companies with low revenue growth and low earnings yield. Companies for this scatter plot have revenue growth rates between -11.8% and 15.9%. Companies with NA or NM values do not appear.
INDUSTRY ANALYSIS
The Machinery industry continues to experience consolidation, globalization, and cost containment with the biggest companies expected to continue to dominate and generate the most revenue.
The challenges the industry faces include the surges in commodity costs, which lowers margins. The result of these commodity increases have been higher prices, which customers have generally seemed to absorb as surcharges have helped cover the difference, though there is no guarantee this will continue. Steel and copper in particular saw the highest increase in prices.
Manufactures have been moving to lower cost areas for production in order to contain costs. This allows the company to achieve better margins and improve competitiveness. Additionally, another positive along with this is that it allows the company to be closer to the emerging demand base and thus its new customers. The three main segments of the machinery industry are flow control equipment, electrical equipment and industrial automation. The need for products from these groups is driven on a macro-level to a certain degree, which depends on the strength of the world economy as well as government funding. Geographically, the outlook for the industry remains positive in North America, Latin America, and Asia, with a neutral forecast for Europe. As with any industry that exports products, the machinery industry is helped by a weaker U.S. dollar and less competitive as the dollar strengthens.
The machinery industry is not heavily regulated, though there has been an increased interest by the government to raise energy efficiency of electrical equipment. Along with improved efficiency, the products that will likely continue to support growth in the industry are wireless components, including RFID (radio frequency ID), sensors - especially for use in detecting biological or chemical factors. Pump and valve technology will always be in demand in order to fulfill the ongoing need for the treatment of drinkable water and wastewater treatment. Finally, robotics orders have recently rebounded after suffering from the downturn in the automotive market.
The key players in the industry include Caterpillar (CAT), Deere (DE), Illinois Tool Works (ITW), Cummins (CMI), Eaton Corp (ETN), and Ingersoll-Rand (IR).
PEER GROUP: Machinery
Recent Market Price/ Net Sales Net Income
Ticker Company Name Price ($) Cap ($M) Earnings TTM ($M) TTM ($M)
DOV DOVER CORP 72.08 11,183 19.64 6,863.08 759.68
SNA SNAP-ON INC 160.35 9,324 19.11 3,608.40 496.50
XYL XYLEM INC 46.30 8,283 24.50 3,663.00 342.00
MIDD MIDDLEBY CORP 126.07 7,254 34.54 1,936.36 207.92
FLS FLOWSERVE CORP 52.27 6,814 25.01 4,493.66 277.86
ITW ILLINOIS TOOL WORKS 108.80 39,099 20.88 13,337.00 1,909.00
SWK STANLEY BLACK & DECKER INC 114.37 17,578 18.60 11,213.90 910.80
SWH STANLEY BLACK & DECKER INC 118.64 17,578 19.29 11,213.90 910.80
IR INGERSOLL-RAND PLC 65.69 16,913 23.13 13,307.00 765.70
PH PARKER-HANNIFIN CORP 115.36 15,537 21.44 11,548.11 744.50
PNR PENTAIR PLC 60.16 10,872 NM 6,549.50 -82.90
COMPANY DESCRIPTION
Dover Corporation manufactures and sells a range of equipment and components, specialty systems, and support services in the United States and internationally. The company operates in four segments: Energy, Engineered Systems, Fluids, and Refrigeration & Food Equipment. The Energy segment provides solutions and services for the production and processing of oil, natural gas liquids, and gas to drilling and production, bearings and compression, and automation end markets. The Engineered Systems segment offers precision marking and coding, digital textile, soldering and dispensing equipment, and related consumables and services; and automation components, including manual clamps, power clamps, rotary and linear mechanical indexers, conveyors, pick and place units, glove ports, and manipulators, as well as end-of-arm robotic grippers, slides, and end effectors for fast-moving consumer goods, digital textile printing, vehicle service, environmental solutions, and industrials end markets. The Fluids segment focuses on the safe handling of critical fluids across the retail fueling, chemical, hygienic, and industrial markets. It also manufactures connectors for use in various bio-processing applications; and displacement and centrifugal pumps for demanding and specialized fluid transfer process applications. The Refrigeration & Food Equipment segment provides refrigeration systems, refrigeration display cases, specialty glass, commercial glass refrigerator and freezer doors, and brazed heat exchangers; and electrical distribution products and engineering services, commercial food service equipment, cook-chill production systems, custom food storage and preparation products, kitchen ventilation systems, conveyer systems, beverage can-making machinery, and packaging machines used for meat, poultry, and other food products. The company was founded in 1947 and is headquartered in Downers Grove, Illinois.
DOVER CORP 3005 Highland Parkway Downers Grove, IL 60515 USA Phone: 630-541-1540 Fax: 630-743-2671 http://www.dovercorporation.com STOCK-AT-A-GLANCE
Below is a summary of the major fundamental and technical factors we consider when determining our overall recommendation of DOV shares. It is provided in order to give you a deeper understanding of our rating methodology as well as to paint a more complete picture of a stock's strengths and weaknesses. It is important to note, however, that these factors only tell part of the story. To gain an even more comprehensive understanding of our stance on the stock, these factors must be assessed in combination with the stock’s valuation. Please refer to our Valuation section on page 5 for further information.
FACTOR SCORE
Growth
1.0
out of 5 starsMeasures the growth of both the company's income statement and cash flow. On this factor, DOV has a growth score better than 10% of the stocks we rate.
weak strong
Total Return
2.5
out of 5 starsMeasures the historical price movement of the stock. The stock performance of this company has beaten 40% of the companies we cover.
weak strong
Efficiency
4.5
out of 5 starsMeasures the strength and historic growth of a company's return on invested capital. The company has generated more income per dollar of capital than 80% of the companies we review.
weak strong
Price volatility
3.5
out of 5 starsMeasures the volatility of the company's stock price historically. The stock is less volatile than 60% of the stocks we monitor.
weak strong
Solvency
5.0
out of 5 starsMeasures the solvency of the company based on several ratios. The company is more solvent than 90% of the companies we analyze.
weak strong
Income
4.0
out of 5 starsMeasures dividend yield and payouts to shareholders. The company's dividend is higher than 70% of the companies we track.
weak strong
THESTREET RATINGS RESEARCH METHODOLOGY
TheStreet Ratings' stock model projects a stock's total return potential over a 12-month period including both price appreciation and dividends. Our Buy, Hold or Sell ratings designate how we expect these stocks to perform against a general benchmark of the equities market and interest rates. While our model is quantitative, it utilizes both subjective and objective elements. For instance, subjective elements include expected equities market returns, future interest rates, implied industry outlook and forecasted company earnings. Objective elements include volatility of past operating revenues, financial strength, and company cash flows.
Our model gauges the relationship between risk and reward in several ways, including: the pricing drawdown as compared to potential profit volatility, i.e.how much one is willing to risk in order to earn profits; the level of acceptable volatility for highly performing stocks; the current valuation as compared to projected earnings growth; and the financial strength of the underlying company as compared to its stock's valuation as compared to projected earnings growth; and the financial strength of the underlying company as compared to its stock's performance. These and many more derived observations are then combined, ranked, weighted, and scenario-tested to create a more complete analysis. The result is a systematic and disciplined method of selecting stocks.
Consensus EPS Estimates² ($)
IBES consensus estimates are provided by Thomson Financial
0.87 Q2 FY16 3.50 E 2016(E) 3.93 E 2017(E) INCOME STATEMENT Q1 FY16 Q1 FY15
Net Sales ($mil) 1,622.27 1,715.50
EBITDA ($mil) 248.81 296.81
EBIT ($mil) 160.20 216.63
Net Income ($mil) 99.36 209.51
BALANCE SHEET
Q1 FY16 Q1 FY15
Cash & Equiv. ($mil) 243.72 538.49
Total Assets ($mil) 8,980.90 8,646.71
Total Debt ($mil) 3,016.50 2,843.38
Equity ($mil) 3,698.13 3,579.11
PROFITABILITY
Q1 FY16 Q1 FY15
Gross Profit Margin 42.15% 41.67%
EBITDA Margin 15.33% 17.30% Operating Margin 9.88% 12.63% Sales Turnover 0.76 0.89 Return on Assets 8.45% 9.53% Return on Equity 15.63% 20.26% DEBT Q1 FY16 Q1 FY15 Current Ratio 1.42 1.50 Debt/Capital 0.45 0.44 Interest Expense 33.32 33.01 Interest Coverage 4.81 6.56 SHARE DATA Q1 FY16 Q1 FY15
Shares outstanding (mil) 155 160
Div / share 0.42 0.40
EPS 0.64 0.72
Book value / share 23.84 22.32
Institutional Own % NA NA
Avg Daily Volume 1,308,952 1,875,548
2 Sum of quarterly figures may not match annual estimates due to use of median consensus estimates.
FINANCIAL ANALYSIS
DOVER CORP's gross profit margin for the first quarter of its fiscal year 2016 is essentially unchanged when compared to the same period a year ago. Sales and net income have dropped, although the growth in net income underperformed the average competitor within the industry, the revenue growth did not. DOVER CORP has weak liquidity. Currently, the Quick Ratio is 0.86 which shows a lack of ability to cover short-term cash needs. The liquidity decreased from the same period a year ago, despite already having weak liquidity to begin with. This would indicate deteriorating cash flow.
At the same time, stockholders' equity ("net worth") has remained virtually unchanged only increasing by 3.32% from the same quarter last year. Overall, the key liquidity measurements indicate that the company is in a position in which financial difficulties could develop in the future.
STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. To learn more visit www.TheStreetRatings.com.
RATINGS HISTORY
Our rating for DOVER CORP was recently upgraded from Hold to Buy on 5/25/2016. As of 6/9/2016, the stock was trading at a price of $72.08 which is 2.6% below its 52-week high of $73.97 and 41.6% above its 52-week low of $50.91.
2 Year Chart 2014 2015 $75 $100 B U Y : $ 66 .6 7 H O LD : $ 55 .3 1 B U Y : $ 88 .8 7
MOST RECENT RATINGS CHANGES
Date Price Action From To
5/25/16 $66.67 Upgrade Hold Buy
1/27/16 $55.31 Downgrade Buy Hold
6/9/14 $88.87 No Change Buy Buy
Price reflects the closing price as of the date listed, if available
RATINGS DEFINITIONS &
DISTRIBUTION OF THESTREET RATINGS (as of 6/9/2016)
38.56% Buy - We believe that this stock has the opportunity to appreciate and produce a total return of more than 10% over the next 12 months.
31.18% Hold - We do not believe this stock offers conclusive evidence to warrant the purchase or sale of shares at this time and that its likelihood of positive total return is roughly in balance with the risk of loss.
30.26% Sell - We believe that this stock is likely to decline by more than 10% over the next 12 months, with the risk involved too great to compensate for any possible returns.
TheStreet Ratings
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VALUATION
BUY. This stock's P/E ratio indicates a discount compared to an average of 24.54 for the Machinery industry and a discount compared to the S&P 500 average of 24.45. To use another comparison, its price-to-book ratio of 3.02 indicates valuation on par with the S&P 500 average of 2.79 and a discount versus the industry average of 3.79. The price-to-sales ratio is below both the S&P 500 average and the industry average, indicating a discount. Upon assessment of these and other key valuation criteria, DOVER CORP proves to trade at a discount to investment alternatives within the industry.
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2
3
4
5
Price/Earnings
premium discount
DOV 19.64 Peers 24.54
• Discount. A lower P/E ratio than its peers can signify a less expensive stock or lower growth expectations.
• DOV is trading at a discount to its peers.
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2
3
4
5
Price/CashFlow
premium discount
DOV 13.32 Peers 12.87
• Average. The P/CF ratio, a stock’s price divided by the company's cash flow from operations, is useful for comparing companies with different capital requirements or financing structures. • DOV is trading at a valuation on par to its peers.
1
2
3
4
5
Price/Projected Earnings
premium discount
DOV 18.34 Peers 20.56
• Average. An average price-to-projected earnings ratio can signify an industry neutral stock price and average future growth expectations.
• DOV is trading at a valuation on par with its peers.
1
2
3
4
5
Price to Earnings/Growth
premium discount
DOV NM Peers 10.62
• Neutral. The PEG ratio is the stock’s P/E divided by the consensus estimate of long-term earnings growth. Faster growth can justify higher price multiples.
• DOV's negative PEG ratio makes this valuation measure meaningless.
1
2
3
4
5
Price/Book
premium discount
DOV 3.02 Peers 3.79
• Discount. A lower price-to-book ratio makes a stock more attractive to investors seeking stocks with lower market values per dollar of equity on the balance sheet.
• DOV is trading at a discount to its peers.
1
2
3
4
5
Earnings Growth
lower higher
DOV -15.64 Peers -26.46
• Higher. Elevated earnings growth rates can lead to capital appreciation and justify higher
price-to-earnings ratios.
• DOV is expected to have an earnings growth rate that significantly exceeds its peers.
1
2
3
4
5
Price/Sales
premium discount
DOV 1.63 Peers 1.64
• Average. In the absence of P/E and P/B multiples, the price-to-sales ratio can display the value investors are placing on each dollar of sales. • DOV is trading at a valuation on par with its industry
on this measurement.
1
2
3
4
5
Sales Growthlower higher
DOV -10.47 Peers -5.55
• Lower. A sales growth rate that trails the industry implies that a company is losing market share. • DOV significantly trails its peers on the basis of
sales growth
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