Report
Joshua Aguilar
EUR 850.00 For Business Accounts Only

Morningstar | Dover Continues to Perform According to Our Long-Term Expectations

We view Dover as a collection of moaty businesses in niche markets. Its reliable earnings power was only masked by its former Jekyll-and-Hyde upstream business. When times were good, oil and gas sales were a boon to Dover’s results. But when oil prices fell from 2014 to 2016, Dover’s results were squeezed. After the spin-off of Apergy, we believe the market has reassessed Dover’s value, allowing new CEO Rich Tobin to focus on cost-reduction efforts that are already bearing fruit as evidenced by results once he took the helm.The best diversified industrials, in our view, are GDP-plus businesses, with portfolios that consist of subsidiaries that have leading and profitable market share, backed by an economic moat. At Dover, we think all these factors are at play, to some degree. Many of Dover’s businesses hold the first or second share position in consolidated niche markets. Customers in these markets demand highly technical, engineered solutions and trust Dover’s portfolio of brands to meet both safety and environmental regulatory standards. Finally, Dover benefits from a large installed base, backed by highly recurring service revenue.Dover’s current portfolio benefits from myriad secular trends, including traceability and food label regulations, technological advancements in both printing and refrigeration techniques, customer demand for energy-efficient solutions, rising urbanization in the developing world, increasing volume of surgical procedures, close-the-door refrigeration, and chip card regulation (EMV), the last of which we believe will propel normalized growth past 2020. As a result, we believe management can realistically achieve its goal of 3%-5% organic growth per year despite appreciable refrigeration and food equipment headwinds. We project about 4% top-line growth during our explicit forecast.We believe Dover can materially increase each of its segment margins, net of acquisitions, based on various productivity initiatives--specifically, about 150 basis points, 150 basis points, and 500 basis points in the firm’s engineered systems, fluids, and refrigeration and food equipment segments, respectively, by 2022.
Underlying
Dover Corporation

Dover is a manufacturer and solutions provider. The company provides services through five segments: Engineered Products, which provides a range of products, software and services; Fueling Solutions, which provides components, equipment and software and service solutions enabling transport of fuels and other hazardous fluids; Imaging and Identification, which includes supplying precision marking and coding; Pumps and Process Solutions, which includes manufacturing of pumps; and Refrigeration and Food Equipment, which provides equipment and systems that serve the commercial refrigeration, heating and cooling and food equipment markets.

Provider
Morningstar
Morningstar

Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.

Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.

We have operations in 27 countries.

Analysts
Joshua Aguilar

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