Dover (DOV) Shares Up on Accelerated Companies Acquisition
Shares of Dover Corporation (DOV) gained as much as 1.3% and eventually closed at $79.79 on Oct 3, a day after it acquired Accelerated Companies LLC. In line with its expansion strategy, Dover purchased Accelerated Companies for $430 million, subject to a customary adjustment for working capital, to bolster its position in the U.S. shale market.
Headquartered in The Woodlands, TX, Accelerated Companies’ core offerings include electric submersible pumps (ESP), hydraulic jet pump systems, gas lift systems, surface pumping and modular process systems for filtration, separation, heating and other fluid handling operations.
ESP, which are used in oil production to provide an efficient form of artificial lift, can operate across a broad range of flow rates and depths and also prevent pump cavitation. Over the last several years, ESP technology has developed a reputation as a low-maintenance, cost-effective alternative in various fluid-movement surface applications in the petroleum industry.
Accelerated Companies will become part of Dover's energy business after the buyout. The former’s innovative ESP offerings and jet pump technologies matches Dover’s existing rod lift products well. Together, these are expected to help in the development of cavity pump applications and surface production along with providing artificial lift solutions to customers for the complete life of their wells.
Shale gas in the U.S. is rapidly increasing as an available source of natural gas. The acquisition of Accelerated Companies will benefit Dover's energy segment from the emerging North American trend of installing ESP systems early in the well completion cycle of high flow unconventional oil wells.
The deal is expected to reduce Dover's earnings by 3 cents per share in the fourth quarter due to transaction-related costs but will add 5–6 cents per share to the company’s earnings in 2015.
Dover’s expansion has been mainly driven by acquisitions. In early 2014, Dover acquired Italy-based MS Printing Solutions S.r.l. The acquisition will help the company in expanding beyond the fast moving consumer goods and industrial markets and enter into the textile market. Last year, Dover acquired Italy-based Finder for $145 million to strengthen the position of Pump Solutions Group in the energy market and enhance its global footprint.
Dover witnessed strong growth in its second-quarter 2014 results mainly driven by organic growth and acquisitions. At its second-quarter conference call, Dover announced full-year 2014 earnings guidance in the range of $4.75–$4.85 per share.
Going into 2015, the company sees favorable trends with strong US oil & gas dynamics, strong shipments in Printing & Identification, Waste Handling and Fluids as well as benefits of recent acquisitions. Moreover, Dover remains optimistic about the acquisitions in its pipeline which are expected to close in the coming quarters.
Illinois-based Dover is an industrial conglomerate producing a wide range of specialized industrial products and manufacturing equipment. It operates through four major operating segments: Energy, Engineered Systems, Fluids and Refrigeration & Food Equipment.
Dover currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the sector include Blount International Inc. (BLT), Middleby Corp. (MIDD) and Nordson Corp. (NDSN). While Blount International sports a Zacks Rank #1 (Strong Buy), Middleby and Nordson carry a Zacks Rank #2 (Buy).
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