Dover Corp (DOV – Analyst Report) has seen the Zacks Consensus Estimate fall in a meaningful way over the last few months. The stock is now a Zacks Rank #5 (Strong Sell) and it is the Bear of the Day.
Dover Corp manufactures and sells a range of equipment and components. The company operates in four segments: Energy, Engineered Systems, Fluids, and Refrigeration & Food Equipment. The company was founded in 1947 and is headquartered in Downers Grove, Illinois.
I normally expect to see a lot of earnings misses when I look at a Zacks Rank #5 (Strong Sell) stock. That is not the case for DOV as it has missed the Zacks Consensus Estimate only one time since 2010. That is pretty impressive, but beats alone will not give a stock a strong Zacks Rank.
Estimates have been falling all year and were doing so last year as well. The best way to see this is in the chart I pulled from the Zacks Research System (ZRS) below.
The 2016 Zacks Consensus Estimate is also seeing a lot of downward pressure. It has moved from $5.77 in September of last year to $4.73 – a drop of more than $1 per share!
The valuation for DOV is pretty much in line with the industry average. The 16x forward PE is just a hair below the 17x industry average. the 3x price to book multiple is just above the 2.6x industry average, as is the 1.5x price to sales multiple with the industry average at 1x. DOV is expected to post earnings growth of 11.6% in 2016, and that is just a little higher than 9.7% industry average. That growth would stop a string of declines, as earnings fell 11.7% in 2014 and are expected to fall another 9% this year.
Zacks has developed a chart that helps investors see how earnings estimates have impacted the price of the stock over the last several years. We call this chart the price and consensus chart, and each color coded lines represent analyst estimates over a designated year. As estimates increase, the stock tends to follow. The Zacks Rank is impacted by earnings estimate increases, beats and incorporates the idea of analyst agreement and magnitude. As a Zacks Rank #5 (Strong Sell) we see that estimates are moving lower and investors would be wise to wait until the estimates start to move higher.
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Brian Bolan is a Stock Strategist for Zacks.com. He is the Editor in charge of the Zacks Home Run Investor service, a Buy and Hold service where he recommends the stocks in the portfolio.