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Dover: Revenue, EPS, Valuations

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Expectations for robotics and drone solutions

International Data Corporation expects aggregate expenditure on robotics and drone solutions to record an annual growth of 21.1%, or $103.1 billion, in 2018. It expects the aggregate outlay to grow at a 25.4% CAGR (compound annual growth rate) through 2021 to $218.4 billion.

Robotics is expected to account for 90% of total outlay between 2017 and 2021. Industrial robotics solutions could form more than 70% of the total outlay followed by service and consumer robots.

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Dover’s valuations

Dover (DOV) has missed three consensus revenue and earnings estimates in the last 20 quarters. Its revenue and EPS have grown at a five-year CAGR of 3.4% and 6.4%, respectively. It has a price-to-sales ratio of 1.5x compared to the sector at 2.2x, the S&P 500 at 2.2x, and the top ten US robotics stocks in terms of market cap.

The company’s PE ratio of 15.9x compares to the sector and S&P 500 at 37.5x and 22.1x, respectively. It has a dividend yield of 2.5% compared to the sector and the S&P 500 at 1.4% and 2.3%, respectively.

DOV stock has fallen 5.8% year-to-date.

What contributed to Dover’s valuations?

So far this year, Dover has made an acquisition, released its fiscal 2017 financial results, elected a new CEO, released its first-quarter financial results, and executed a spinoff.

  • The acquisition of Ettlinger Kunststoffmaschinen in January is expected to drive Dover’s position in plastics and polymers processing in its Fluids segment.
  • Dover’s revenue grew 15% in fiscal 2017, driven by organic and acquisition growth of 8% and 10%, respectively, partially offset by a 3% impact from dispositions. Its EPS grew 39%, and it completed share buybacks worth $1 billion. It also increased its dividend for the 62nd successive year.
  • Richard J. Tobin was elected CEO in March following the retirement of Robert A. Livingston.
  • The company’s revenue grew 6% in the first quarter of 2018, driven by organic growth, acquisitions, and positive foreign exchange increases of 4%, 1%, and 4%, respectively, partially offset by a 3% impact from dispositions. Its EPS grew 26% in the quarter.
  • In May, the company spun off Apergy, a provider of engineered technologies for drilling and producing oil and gas. Analysts have assigned a negative consensus revenue estimate for the second quarter of 2018.

AI ETFs

The Power Shares QQQ ETF (QQQ) offers a dividend yield of 0.7% at a PE ratio of 22.2x. It has 60% exposure to the technology sector. The Technology Select Sector SPDR ETF (XLK) offers a dividend yield of 1.2% at a PE ratio of 18.4x. It has a 92% exposure to the technology sector.

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