Why Dover Printing & Identification Sales Declined in 1Q16



Dover Engineered Systems margins rose in 1Q16

Engineered Systems sales were responsible for 35.6% of Dover’s (DOV) total sales and 49.5% of its total segment profits in 1Q16. Sales in the Engineered Systems segment increased 0.7% to $577 million. Organic gains of 3% were offset by a 2% impact of currency translations. Segment profits increased 6.8% to $94 million driven by productivity and cost actions. This led to an 80 bps (basis point) improvement in segment margins to 16.2%. Excluding restructuring costs of $2 million, margins increased 50 bps to 16.6%.

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Business-wise trends in organic sales

Dover’s Printing & Identification segment accounted for 41.6% of segment sales in 1Q16. Revenues for this segment increased 4.1% to $239.7 million led by an acquisitive growth of 8%. Organic sales in printing increased 1% led by an uptick in the North American coding and marking market. In Industrial Systems, which made up the remaining 58.2% of the unit, sales declined 2% to $337 million. The Industrials unit achieved a broad-based organic growth of 4%, which was offset by a currency impact of 1%.

Bookings and outlook

Bookings were flat at $573 million as organic growth of 4% and acquisitive growth of 3% were offset by the sale of businesses last year. Orders in the printing business were flat, but industrial orders increased 6% in the quarter. The overall book-to-bill ratio of 0.99 was due to printing book-to-bill of 1.01, partially offset by industrial book-to-bill of 0.98. The company estimates peg sales to rise 1%–3% on an organic basis for fiscal 2016.

Investors interested in trading in the industrial space can consider the Guggenheim S&P 500 Equal Weight Industrials ETF (RGI). Those interested in trading in dividend-based ETFs can consider the SPDR S&P Dividend ETF (SDY). Major holdings in SDY include AT&T (T) with a weight of 2.0%, Caterpillar (CAT) with a weight of 1.9%, and Dover (DOV) with a weight of 1.1%.


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