Dover Corporation (DOV: 47.74 +1.70 +3.69%) reported second-quarter 2010 earnings from continuing operations of 91 cents per share, beating the Zacks Consensus Estimate of 78 cents by 13 cents. Results were ahead of the prior-year quarter earnings from continuing operations of 54 cents per share. Net income from continuing operations for the quarter was $171.9 million, up 70% from $100.9 million reported in the second-quarter 2009.Including a loss from discontinued operations of $2.0 million or 1 cent per share, Dover reported a net income of $169.9 million or 90 cents per share, compared with $97.1 million or 52 cents per share in the second quarter of 2009. Net income in the year-ago quarter included a loss from discontinued operations of $3.8 million or 2 cents per share.
Dover recorded revenues of $1.8 billion in the second quarter of 2010, ahead of the Zacks Consensus Estimate of $1.7 billion. Revenue for the quarter improved 29% year over year. An organic growth of 24%, a 4% increase from acquisitions, and a 1% favorable impact from foreign exchange fueled the revenue growth in the quarter.
Revenue increases across all segments led to the overall revenue climb with refrigeration equipment, electronic technologies, fluid management and product ID leading the charge.
Cost of goods and services in the quarter total $1.1 billion, up 22.5% from $0.9 billion in second quarter 2009. Gross margin increased 300 basis points year-over-year to 38.5% in the quarter under review.
Selling and administrative expenses were $423.8 million compared with $365.0 million in the prior year quarter.
Operating earnings more than doubled from the prior-year quarter to $264.9 million in second-quarter 2010. Operating margin increased 560 basis points year-over-year to 16.9% in the quarter.
Segment Update
Industrial Products: Revenue increased 20.7% year over year to $462.4 million in the quarter, driven by revenue increase both at Material Handling as well as Mobile Equipment. Net earnings increased by a whopping 142% year over year to $61.6 million.
Engineered System: Revenue increased 23.5% year over year to $577.1 million in the quarter, driven by revenue increase both at Product Identification as well as Engineered Products. Net earnings increased by a whopping 47.3% year over year to $84.7 million.
Fluid Management: Revenue increased 64.1% year over year to $403.7 million in the quarter driven by revenue increase both at Energy as well as Fluid Solutions. Net earnings increased by a whopping 73% year over year to $96.2 million.
Bookings and Backlog
Bookings during the quarter under review increased 40.3% year over year to $1.9 billion, driven by booking increases across all segments, Electronic Technologies in particular.
Backlog at the end of second quarter 2010 was $1.4 billion, up 28.5% year over year largely due to a backlog increase at Electronic Technologies.
Cash Flow
Cash from operating activities in second quarter 2010 was $231.2 million, higher than $192.4 million in the prior year quarter. Capital expenditure totaled $46.9 million compared with $27 million in second quarter 2009. As a result free cash flow was $184.3 million compared with $165.5 million in second quarter 2009.
Dividend Update
Dover paid a quarterly dividend of 26 cents per share to shareholders of record as of May 31, 2010. The dividend represents an increase of 4% from 25 cents paid in second quarter 2009.
Full-Year 2010 Guidance
Management expects revenue to grow in the range of 16%-18%, comprising an organic revenue growth of 13%-15% and growth of 3% from acquisitions. Management’s projection is based on the solid first half 2010 along with a strong book-to-bill. Management also estimates earnings in the range of $3.05 - $3.25 per share based on better revenue expectation, solid first half 2010 and continued focus on margin improvement.
Solid performance and bookings across all segments coupled with the ability to generate strong cash flow, continued focus on margin improvement and shareholders value position Dover to post better results in the upcoming quarters. Also, it continues to pursue strategic acquisitions to improve its product offering and complement its organic growth strategy. However, unfavorable foreign currency fluctuations can adversely affect its performance.
| Overall Summary: |  25%, Bullish 75%, Bearish | Trade Quality: | Upside 30%, Poor Downside 60%, Fair |
| Analysts' Targets | |
| Deutsche Bank Securities | $58 |
| Accumulate | |
| Tuesday, July 13, 2010 | |
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