Dover Corporation (DOV) Q2 2023 Earnings Call Transcript

For the period ending June 30, 2023

July 25, 2023 10:00 a.m. ET

Prepared Remarks

Questions and Answers

Call Participants

Prepared Remarks:

Operator

Good morning, and welcome to Dover's Second Quarter 2023 Earnings Conference Call. Speaking today are Richard J. Tobin, President and Chief Executive Officer; Brad Cerepak, Senior Vice President and Chief Financial Officer; and Jack Dickens, Senior Director of Investor Relations. After the speaker's remarks, there will be a question-and-answer period. [Operator Instructions]. As a reminder, ladies and gentlemen, this conference call is being recorded, and your participation implies consent to our recording of this call. If you do not agree with these terms, please disconnect at this time. Thank you. I would now like to turn the call over to Mr. Jack Dickens. Please go ahead, sir.

Jack Dickens

Thank you, Shelby. Good morning, everyone, and thank you for joining our call. An audio version of this call will be available on our website through August 15, and a replay link of the webcast will be archived for 90 days. Our comments today will include forward-looking statements based on current expectations. Actual results and events could differ from those statements due to a number of risks and uncertainties, which are discussed in our SEC filings. We assume no obligation to update our forward-looking statements. With that, I will turn the call over to Rich.

Richard Tobin

Thanks, Jack. Let's start on Slide 3. Our results are in line with our internal forecast in the second quarter. Our secular growth exposed businesses that we highlighted at our recent Investor Day outperformed in the quarter with heat exchangers, natural refrigerant systems and polymer processing, all posting growth in excess of 20%.

During the quarter, we incurred operational headwinds from our vehicle service group main production facility as a result of an ERP implementation, which cost us approximately $50 million in revenue and approximately $0.10 of EPS. This one's on me. The business has been doing an excellent job on efficiency actions related to fixed costs, SKU management and vertical integration over the past 18 months, which has been reflected in the margin performance conducting a much-needed ERP upgrade, which is fundamental to our e-commerce ambitions, while finishing a large CapEx project was in retrospect overly ambitious. And I guess I should have known better.

We exited June -- the good news, we exited June with far improved production performance at the site, and we'll try our best to claw back the lost volumes in the second half. We have a constructive outlook for the second half of the year and are narrowing our annual EPS guidance to $8.85 to $9. Since the start of the year, we expected 2023 performance to be weighted to the second half due to post-pandemic destocking across the industrial economy and the gradual recovery in several of our end markets, with the seasonality of second half earnings consistent with what we saw in the pre-pandemic years.