Dover (NYSE:DOV)
Since our last update, Dover has made several significant announcements. Dover decided to spin its energy business, Apergy, thus greatly reducing earnings volatility; 2) switch to “cash” EPS reporting to focus investors on the strong FCF generation of the portfolio; and 3) transition to a new CEO, Richard Tobin, who has a strong background operating industrial assets. Based on Apergy’s current when-issued share price, the Dover RemainCo is currently valued at an 8% FCF yield on our 2019 estimates, which represents a ~30% discount to the US large-cap multi-industry peer group. With a high quality set of remaining assets, increased strategic optionality, and a catalyst rich path over the next several months – completion of the Apergy spin, repurchase of ~7% of outstanding shares, and communication from the new CEO – we believe Dover’s RemainCo will close the valuation gap to its multi-industry peers.
From Daniel Loeb (Trades, Portfolio)'s first quarter 2018 shareholder commentary.
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