BUY !!! Dover Corporation Common Stock (NYSE: DOV )

Dover Corp. (NYSE:DOV) reported its second quarter earnings posting an EPS of $1.31, up from 91 cents in the year-earlier quarter. Excluding the charge of 12 cents pertaining to tax benefits, adjusted EPS increased 31.0% year over year to $1.19, outperforming the Zacks Consensus Estimate of $1.13.

Total revenue as Dover reported was $2.16 billion versus $1.79 billion in the year-earlier quarter, striding ahead of the Zacks Consensus Estimate of $2.08 billion. Increase in revenue was mainly due to strong energy markets and recovery in some of the infrastructure markets.

Costs and Margins

Dover reported cost of sales of $1.34 billion versus $1.10 billion in the year-ago quarter. Gross profit of the company increased to $815.9 million versus $688.7 million in the prior-year quarter. This led to a gross margin contraction of 70 basis points year over year to 37.8%.

Selling and administrative expenses also increased to $474.1 million in the reported quarter versus $423.8 million in the year-ago quarter. Operating profit soared to $341.7 million in the quarter versus $264.9 million in the prior-year quarter, thereby expanding operating margins 100 basis points year over year to 15.8%.

Segmental Performance

Revenue in the Industrial segment increased to $566.8 million from $462.4 million in the prior-year quarter. Segment’s operating income also increased to $73.3 million from $61.6 million in the year-earlier quarter. However, segment’s margin declined 40 basis points year over year to 12.9% in the quarter.

Net sales in Engineered Systems segment increased to $645.6 million in the quarter from $577.1 million in the year-ago quarter. Segment’s income surged to $94.1 million versus $84.6 million in the year-earlier quarter. However, operating margin of the segment decreased 10 basis points year over year to 14.6%.

Fluid Management segment reported total revenue of $534.5 million in the reported quarter compared with $403.7 million in the year-ago quarter. Segment’s income increased substantially to $131.4 million from $96.2 million in the previous year’s quarter, leading to an operating margin expansion of 80 basis points year over year to 24.6%.

Total revenue of Electronic Technologies segment rose to $412.6 million from $345.6 million in the prior-year quarter. Segment reported operating income of $76.9 million, up from $59.6 million in the last-year’s quarter, expanding the operating margin  by 140 basis points year over year to 18.6%.

Bookings and Backlog

The company ended the quarter with a total of $2.21 billion bookings versus $1.92 billion at the end of the previous year’s quarter. Similarly, backlog of the company increased to $1.78 billion during the quarter, from $1.38 billion in the year-ago quarter.

Financial Position

Cash from operations decreased to $209.3 million from $231.2 million in the prior-year quarter. Capital expenditure soared to $73.8 million from $46.9 million in the year-earlier quarter. Dover’s cash flow of $135.5 million declined from $184.2 million in the year-ago quarter.

Outlook

Prior to the acquisition of Knowles Sound Solutions, the company now expects full year revenue growth in the range of 18% – 20%, representing an organic revenue growth of 12% – 14% and 6% growth from acquisitions. This is based on the assumption of higher volume, tax benefit and a slightly lower effective tax rate. The company also guides EPS in the range of $4.50 – $4.60.

Our Take

Dover continues to pursue strategic acquisitions in a bid to improve its product offerings and complement its organic growth strategy. The acquisition of Sound Solutions, the world’s leading manufacturer of dynamic speakers and receivers for cell phones and other consumer electronics, will place Dover as the leading provider of acoustic products serving the fast growing cellular handset market.

Dover foresees strong growth in the global cell phone market as cell phones become increasingly indispensable for consumers. Dover also acquired pump manufacturer Harbison-Fischer Inc.

Dover expects the acquisition to facilitate the company’s reach in the attractive international oil and gas markets.

Dover Corporation is an industrial conglomerate producing a wide range of specialized industrial products and manufacturing equipment. It operates primarily in the U.S. and has subsidiaries and affiliates in Canada, France, Germany, the Netherlands, Sweden, China and the United Kingdom. Dover caters to a diverse clientele primarily spread over the Americas, Europe and Asia. Dover competes with the likes of Cooper Industries plc (NYSE:CBE), Ingersoll-Rand Plc (NYSE:IR) and Weatherford International Ltd. (NYSE:WFT).

http://www.dovercorporation.com/

Analysts' Targets
Barclays Capital	$68
Overweight
Monday, April 25, 2011
Deutsche Bank Securities	$73
Accumulate
Wednesday, April 13, 2011 Consensus Rating Details Current Average Recommendation 2.11 Previous Average Recommendation 2.00 Change in Average Recommendation 0.11 Number of Analysts Reporting 9  Strong Buy 1,0 Current: 2.11 Previous: 2.00 Change: 0.11 Strong Sell 5,0