Dover (DOV)

Manufacturing company Dover (NYSE:DOV) fell short of the market’s revenue expectations in Q3 CY2025 as sales rose 4.8% year on year to $2.08 billion. Its non-GAAP profit of $2.62 per share was 4.5% above analysts’ consensus estimates.

Company Overview

A company that manufactured critical equipment for the United States military during World War II, Dover (NYSE:DOV) manufactures engineered components and specialized equipment for numerous industries.

Automation that increases efficiency and connected equipment that collects analyzable data have been trending, creating new demand for general industrial machinery companies. Those who innovate and create digitized solutions can spur sales and speed up replacement cycles, but all general industrial machinery companies are still at the whim of economic cycles. Consumer spending and interest rates, for example, can greatly impact the industrial production that drives demand for these companies’ offerings.

Competitors offering similar products include Graco (NYSE:GGG), Illinois Tool Works (NYSE:ITW), and Parker-Hannifin (NYSE:PH).

A company’s long-term sales performance can indicate its overall quality. Any business can have short-term success, but a top-tier one grows for years. Unfortunately, Dover’s 3.5% annualized revenue growth over the last five years was sluggish. This was below our standard for the industrials sector and is a poor baseline for our analysis.

We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Dover’s recent performance shows its demand has slowed as its revenue was flat over the last two years.

We can dig further into the company’s sales dynamics by analyzing its organic revenue, which strips out one-time events like acquisitions and currency fluctuations that don’t accurately reflect its fundamentals. Over the last two years, Dover’s organic revenue was flat. Because this number aligns with its two-year revenue growth, we can see the company’s core operations (not acquisitions and divestitures) drove most of its results.

This quarter, Dover’s revenue grew by 4.8% year on year to $2.08 billion, falling short of Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to grow 6.6% over the next 12 months. Although this projection implies its newer products and services will spur better top-line performance, it is still below average for the sector.

All else equal, we prefer higher gross margins because they make it easier to generate more operating profits and indicate that a company commands pricing power by offering more differentiated products.

Dover’s unit economics are great compared to the broader industrials sector and signal that it enjoys product differentiation through quality or brand. As you can see below, it averaged an excellent 37.2% gross margin over the last five years. That means Dover only paid its suppliers $62.78 for every $100 in revenue.

Dover’s gross profit margin came in at 40.1% this quarter, marking a 1.3 percentage point increase from 38.9% in the same quarter last year. Dover’s full-year margin has also been trending up over the past 12 months, increasing by 1.6 percentage points. If this move continues, it could suggest better unit economics due to more leverage from its growing sales on the fixed portion of its cost of goods sold (such as manufacturing expenses).

Operating margin is one of the best measures of profitability because it tells us how much money a company takes home after procuring and manufacturing its products, marketing and selling those products, and most importantly, keeping them relevant through research and development.

Dover’s operating margin might fluctuated slightly over the last 12 months but has remained more or less the same, averaging 16.1% over the last five years. This profitability was elite for an industrials business thanks to its efficient cost structure and economies of scale. This result isn’t surprising as its high gross margin gives it a favorable starting point.

Looking at the trend in its profitability, Dover’s operating margin might fluctuated slightly but has generally stayed the same over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

This quarter, Dover generated an operating margin profit margin of 18.2%, up 1.3 percentage points year on year. The increase was encouraging, and because its operating margin rose more than its gross margin, we can infer it was more efficient with expenses such as marketing, R&D, and administrative overhead.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Dover’s EPS grew at a solid 10.5% compounded annual growth rate over the last five years, higher than its 3.5% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

Diving into the nuances of Dover’s earnings can give us a better understanding of its performance. A five-year view shows that Dover has repurchased its stock, shrinking its share count by 5%. This tells us its EPS outperformed its revenue not because of increased operational efficiency but financial engineering, as buybacks boost per share earnings.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For Dover, its two-year annual EPS growth of 4.7% was lower than its five-year trend. We hope its growth can accelerate in the future.

In Q3, Dover reported adjusted EPS of $2.62, up from $2.27 in the same quarter last year. This print beat analysts’ estimates by 4.5%. Over the next 12 months, Wall Street expects Dover’s full-year EPS of $9.31 to grow 9.4%.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

Dover has shown robust cash profitability, enabling it to comfortably ride out cyclical downturns while investing in plenty of new offerings and returning capital to investors. The company’s free cash flow margin averaged 11.3% over the last five years, quite impressive for an industrials business.

Dover’s free cash flow clocked in at $370.1 million in Q3, equivalent to a 17.8% margin. This result was good as its margin was 1.9 percentage points higher than in the same quarter last year, but we wouldn’t read too much into the short term because investment needs can be seasonal, causing temporary swings. Long-term trends are more important.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Although Dover hasn’t been the highest-quality company lately because of its poor top-line performance, it historically found a few growth initiatives that worked out well. Its five-year average ROIC was 14.4%, impressive for an industrials business.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Unfortunately, Dover’s ROIC averaged 3 percentage point decreases over the last few years. We like what management has done in the past, but its declining returns are perhaps a symptom of fewer profitable growth opportunities.

Dover reported $0 of cash and $0 of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $1.84 billion of EBITDA over the last 12 months, we view Dover’s 0.0× net-debt-to-EBITDA ratio as safe. We also see its $11.93 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We were impressed by how significantly Dover blew past analysts’ EBITDA expectations this quarter. We were also glad its full-year EPS guidance slightly exceeded Wall Street’s estimates. On the other hand, its organic revenue missed and its revenue fell slightly short of Wall Street’s estimates. Overall, this quarter was mixed. The stock traded up 2.1% to $171.21 immediately after reporting.

Updated: December 4, 2025 at 10:27 PM EST

Are you wondering whether to buy Dover or pass? We urge investors to not only consider the latest earnings results but also longer-term business quality and valuation as well.

Dover isn’t a terrible business, but it isn’t one of our picks. For starters, its revenue growth was weak over the last five years. And while its impressive operating margins show it has a highly efficient business model, the downside is its flat organic revenue disappointed. On top of that, its diminishing returns show management's prior bets haven't worked out.

Dover’s P/E ratio based on the next 12 months is 18.3x. While this valuation is fair, the upside isn’t great compared to the potential downside. We're pretty confident there are superior stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $214 on the company (compared to the current share price of $186.26).