Dover (NYSE:DOV) Misses Q4 Sales Targets

Manufacturing company Dover (NYSE:DOV) missed Wall Street’s revenue expectations in Q4 CY2024 as sales only rose 1.3% year on year to $1.93 billion. Its non-GAAP profit of $2.20 per share was 5.9% above analysts’ consensus estimates.

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Dover's President and Chief Executive Officer, Richard J. Tobin, said, "Dover's fourth quarter results were very encouraging as we move into 2025, with broad-based top line strength across the portfolio and particularly robust performances within the Clean Energy & Fueling and Pumps & Process Solutions segments. Order trends continued their positive trajectory in the quarter with book-to-bill above one, driven by robust bookings in our secular-growth-exposed markets in single-use biopharma components, thermal connectors, and CO2 systems.

Company Overview

A company that manufactured critical equipment for the United States military during World War II, Dover (NYSE:DOV) manufactures engineered components and specialized equipment for numerous industries.

General Industrial Machinery

Automation that increases efficiency and connected equipment that collects analyzable data have been trending, creating new demand for general industrial machinery companies. Those who innovate and create digitized solutions can spur sales and speed up replacement cycles, but all general industrial machinery companies are still at the whim of economic cycles. Consumer spending and interest rates, for example, can greatly impact the industrial production that drives demand for these companies’ offerings.

Sales Growth

A company’s long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Regrettably, Dover’s sales grew at a sluggish 1.7% compounded annual growth rate over the last five years. This was below our standards and is a poor baseline for our analysis.

We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Dover’s history shows it grew in the past but relinquished its gains over the last two years, as its revenue fell by 4.6% annually.

This quarter, Dover’s revenue grew by 1.3% year on year to $1.93 billion, falling short of Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to grow 4.6% over the next 12 months. Although this projection suggests its newer products and services will fuel better top-line performance, it is still below the sector average.

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Operating Margin

Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses–everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.

Dover has been a well-oiled machine over the last five years. It demonstrated elite profitability for an industrials business, boasting an average operating margin of 15.6%. This result isn’t too surprising as its gross margin gives it a favorable starting point.

Looking at the trend in its profitability, Dover’s operating margin rose by 1.6 percentage points over the last five years, showing its efficiency has improved.

This quarter, Dover generated an operating profit margin of 15.3%, in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.

Earnings Per Share

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Dover’s EPS grew at an unimpressive 6.9% compounded annual growth rate over the last five years. On the bright side, this performance was better than its 1.7% annualized revenue growth and tells us the company became more profitable on a per-share basis as it expanded.

We can take a deeper look into Dover’s earnings to better understand the drivers of its performance. As we mentioned earlier, Dover’s operating margin was flat this quarter but expanded by 1.6 percentage points over the last five years. On top of that, its share count shrank by 5.8%. These are positive signs for shareholders because improving profitability and share buybacks turbocharge EPS growth relative to revenue growth.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For Dover, EPS didn’t budge over the last two years, a regression from its five-year trend. We hope it can revert to earnings growth in the coming years.

In Q4, Dover reported EPS at $2.20, up from $2.18 in the same quarter last year. This print beat analysts’ estimates by 5.9%. Over the next 12 months, Wall Street expects Dover’s full-year EPS of $8.29 to grow 12.5%.

Key Takeaways from Dover’s Q4 Results

We were impressed by how significantly Dover blew past analysts’ EBITDA expectations this quarter. We were also glad its full-year EPS guidance came in slightly higher than Wall Street’s estimates. On the other hand, its revenue slightly missed. Overall, this quarter had some key positives. The stock traded up 2.6% to $202.29 immediately after reporting.

Sure, Dover had a solid quarter, but if we look at the bigger picture, is this stock a buy? What happened in the latest quarter matters, but not as much as longer-term business quality and valuation, when deciding whether to invest in this stock. We cover that in our actionable full research report which you can read here, it’s free.