Dover Refrigeration Is Still a Bright Spot in 1Q16



Dover Refrigeration & Food Equipment in 1Q16

The Refrigeration & Food Equipment segment was responsible for 22.4% of Dover’s (DOV) total sales and 20.1% of total segment profits in 1Q16. Sales in the quarter fell 2.4% to $363 million as the impact of currency translations and the sale of businesses in the previous year offset organic revenue growth of 3%. Organic revenues were driven by solid gains in retail (RTH) refrigeration. Benefits from productivity and cost actions led to a margin expansion of 80 bps (basis points) to 10.5% in the segment. Excluding the impact of $1 million in restructuring charges, margins increased 100 bps to 10.7%. Segment profits rose 6% to $38 million due to margin expansion.

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Business-wise trends in organic sales

The Dover Refrigeration business contributed 77% to the segment’s 1Q16 revenue. The Food Equipment business made up the remaining 23%. Refrigeration sales fell 4% year-over-year, as the disposition of a business last year offset organic gains of 3%. Organic growth was driven by solid performance in retail (PMR) refrigeration and glass door businesses. Food Equipment sales increased 3% in the quarter entirely due to organic growth within the unit.

Bookings and outlook

The second and third quarters are seasonally the best quarters for Dover’s Refrigeration & Food Equipment segment. The segment’s high book-to-bill ratio of 1.13 in the first quarter is thus not surprising. Bookings fell 2.1% to $411 million due to disposition and currency impacts. On an organic basis, however, bookings increased 5%.

Investors interested in trading in dividend-based ETFs can look into 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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