Dover Updates 2012 & 2013 Outlook (CBE) (DOV) (IR) (WFT)

Dover has trimmed its fiscal 2012 EPS guidance to a range of $4.36 to $4.46 from the earlier guidance of $4.55-$4.65 per share. The reduction of 19 cents stems from an 18 cents reduction from discontinuing non-core businesses, 2 cents pertaining to cost related to the recent Anthony acquisition, offset by a 1 cent accretion from share repurchase activity in the fourth quarter.

Compared with the prior-year adjusted earnings of $4.46 per share, fiscal 2012 guidance represents an annual growth of 2% to 5%. Revenue is expected to be around $8.1 billion for the year.

The company has also initiated guidance for fiscal 2013 with earnings in the range of $5.05 to $5.35 per share. The midpoint of fiscal 2013 guidance stands at $5.20 per share, up 18% from the fiscal 2012 guidance’s midpoint of $4.41.

The guidance is based on organic revenue growth of 3% to 5% and acquisition growth of 4%, leading to full-year revenue growth of 7% to 9%. Segment margin is expected to expand 30 to 70 basis points from 2012, driven by productivity benefits and continued cost management.

The company is committed to achieving its targeted annual organic sales growth of 4% to 6% in the next three years, aided by accretive acquisitions. Including the Anthony acquisition, growth rate is expected to be 5-7%. The company continues to focus on its five key growth spaces – communication components, energy, product ID, refrigeration and food equipment, and fluid solutions.

In 2012, these areas contributed to 77% of Dover’s revenue and 79% of operating earnings. The company expects to deliver segment margin expansion of 50 basis points annually. Free cash flow is expected to be around 10% of revenues and projected to reach the $1 billion mark in 2015.

The company also remains committed to returning cash to its shareholders through dividends and share buybacks. The company has a commendable record of raising dividends for the last 57 consecutive years.

Dover recently announced that its board has authorized an additional $1 billion share repurchase program to be completed over the next 12 to 18 months. Dover also announced its intent to divest certain non-core businesses, which cater to the electronic assembly and test markets.

Dover recently acquired Anthony International – a manufacturer of glass doors for commercial refrigerators – for $602.5 million. The acquisition will expand Dover’s product portfolio and enhance its service offerings. Dover will also be able to leverage Anthony's geographic footprint to grow its international presence.

The acquisition adds significantly to its Engineered Systems portfolio. In addition, growth initiatives and new product offerings in the Fluids and Refrigeration spaces will add to the growth profile of the Engineered Systems segment.

In the Communication Technologies segment, rising demand among customers for improved audio products in their mobile devices provide significant opportunities for growth and new market penetration. In the Energy segment, the company sees significant opportunities to expand globally in production and downstream offerings. New product launches, expansion of core businesses and printing positions will help drive growth in the Printing & Identification segment.

New York-based Dover is an industrial conglomerate producing a wide range of specialized industrial products and manufacturing equipment. Dover competes with companies like Cooper Industries plc (CBE), Ingersoll-Rand Plc (IR) and Weatherford International Ltd. (WFT). The company retains a short-term Zacks #3 Rank (Hold).