Dividend King Dover Corporation Raises Guidance
While still impacted by the global supply chain issues, early cycle companies like Dover Corporation are proving to be better positioned for the supply chain crunch. The supply chain crunch...
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Early-Stage Dover Corporation Rides Demand To New Highs
While still impacted by the global supply chain issues, early cycle companies like Dover Corporation (NYSE: DOV) are proving to be better positioned for the supply chain crunch. The supply chain crunch is underpinned by several trends, one of which is low inventories throughout the system. Low inventory throughout the system has manufacturers scrambling for materials to make new widgets and that brings us back to the point. Dover Corporation manufactures equipment and components for use in a wide variety of industrial, scientific, manufacturing, and commercial/residential refrigeration applications so it is in high demand across all of its end markets. The takeaway, Dover Corporation's business is booming and only limited by what it can produce and deliver.
"During the quarter we demonstrated the strength of our portfolio with revenue and new order growth across all five of our operating segments. We improved margins year-over-year despite well-advertised supply chain, logistics, and labor availability challenges that adversely impacted shipment timing and margin performance in several businesses, most notably in our Refrigeration and Food Equipment and Engineered Products segments," said Dover Corporation CEO Richard J. Tobin.
Dover Corporation Grows Revenue And Widens Margins
Dover Corporation is managing its supply chain issues with aplomb and was able to deliver revenue and earnings above expectations. The company reported $2.01 billion in net consolidated revenue which is good for a gain of 14.9% over last year and beat the Marketbeat.com consensus estimate by 100 basis points. The company said it is seeing strength across all segments and expects to see the strength continue into the fourth quarter at least.
Moving down the report, results were not equal across the network but, on balance, the company was able to improve its operating margins by 165 basis points. The operating margin of 13.08% drove a 31% increase in the GAAP earnings which beat the consensus by $0.18 and includes investment in a capacity expansion that will boost revenue and earnings in future quarters. On an adjusted basis, the $1.98 was also strong and beat the consensus by $0.13.
Looking forward, the company is expecting strength to continue and has raised its guidance accordingly. The new guidance of $7.45 to $7.50 in adjusted earnings compares well with the previous consensus estimate of $7.42 and has shares moving higher.
"More positively, our high backlog levels provide beneficial near-term visibility for the remainder of the year and into 2022. As a result, we are raising our full-year EPS guidance," concluded Tobin.
Dover Corporation Is A king Of Dividend Kings
Dover Corporation is a Dividend King with one of the best-looking dividends in the group. The company has been raising the dividend consecutively for 65 years and it's still only paying 27% of its earnings. That's a testament both to the company's earnings growth as well as its management and has it set up for another 65 years of growth. The distribution is a bit low at 1.2% but is at least in line with the broad market average. The distribution has been growing at an 8% CAGR for the last five years so we're not expecting huge double-digit increases but solid mid-to-high single-digit increases are on the table. As for the balance sheet, the company has got a little bit of debt but the balance sheet is otherwise very strong bordering on fortress-like.
The Technical Outlook: Dover Corporation Will Set A New All-Time High
Shares of Dover Corporation are up more than 2% in the wake of the earnings report and guidance increase and are on track to set a new all-time high. Price action has met some resistance near the current all-time high but momentum is bullish, strong, and growing. In our view, the stock will be testing and setting a new all-time high fairly soon and may continue higher. A break above the $176 level would be bullish and could take the stock up into the range of $200.