Shortly after the opening bell, we will initiate a position in Dover by buying 100 shares at roughly $184.20. In addition, we will buy 100 shares of DuPont at roughly $82.12. Following the trades, Jim Cramer’s Charitable Trust will own 100 shares of DOV with a weighting of about 0.60%. It will also own 900 shares of Dupont, increasing its weighting to 2.25% from 2.01%. Dover is diversified global manufacturing company with five operating segments: engineered products, clean energy and fueling, imaging and identification, pumps and process solutions, and climate and sustainability technologies. The company reported a long stretch of disappointing quarters after the Covid pandemic, with orders for its products and services slumping as supply chains worked through excess inventory. But the industrial showed signs of emerging from the slowdown with its 2023 fourth-quarter results, reported in February. The company’s organic revenues fell 3.4%, missing expectations by about 3 percentage points, but it managed an adjusted EPS beat of 3 cents. The guidance for 2024 was soft as well, with management forecasting organic growth of 1% to 3%, versus 3.2% expected, total revenue below the consensus estimate at the midpoint, and adjusted EPS well short of consensus. However, the market took the soft numbers in stride because it sensed a change in trend was afoot. The key line was Dover’s organic bookings, which inflected positive for the first time in eight quarters, up 2% year over year. And that alone was enough for investors to overlook the mixed overall quarter and conservative guidance for the year because it was a sign that the trend of negative revisions to Dover’s forecasts have come to an end. It was the last of the bad quarters. That brings us to the company’s first-quarter 2024 report, which confirmed the positive trend. The order momentum continued into the quarter, accelerating to 3% growth, and management said it expects this positive trend to continue for the rest of the year. You have to watch order trends when it comes to these industrials (or backlogs for long-cycle business) because they are the best indicator of what’s to come. The fact that orders inflected from negative to positive and then continued to improve was a very bullish sign. Meanwhile, total revenue was up 1% — the first positive growth since the first quarter of last year — to $2.09 billion, ahead of the expected $2.03 billion. Dover also had an 8-cent beat on the bottom line off a $1.87 basis. And while the company merely reiterated its full-year 2024 organic growth and total revenue forecasts, it raised the low end of its full-year adjusted EPS outlook by 5 cents — to $9.00 to $9.15 — so that the new mid-point of its guidance of $9.075 was above the consensus estimate of $9.06. Four out of five of the company’s operating units — all except climate and sustainability technologies — beat sales expectations in the period, with particularly noteworthy performance from the largest segment, engineered products. That business posted 9.2% organic growth and total revenues of $543 million, far above the expected $495 million. Management said on its earnings call that strong volumes in waste handling and aerospace and defense drove that result, and also called out bookings growth in vehicle service for that segment. Another standout business was pumps and process solutions, which had 4.5% organic growth and total revenue of $466 million, beating the expected $441 million consensus estimate. Dover management said that “robust volumes in precession components and polymer processing” drove the results, and this is the segment that’s benefitting from the early stages of a turn in the life sciences industry. We talked a few weeks ago about how Dover has exposure to some of our favorite mega-themes. Starting with the data center, which is obviously one of the hottest areas of industrial activity, Dover makes thermal connectors. These are a critical component in liquid cooling of data centers, a process that is gaining adoption due to energy efficiency needs. Bookings in this business more than doubled year over year in the first quarter and the company sees this business growing at a 47% compound annual growth rate from 2019 through 2024. The company also makes heat exchangers, which are used in the data center to maximize heating and cooling performance while simultaneously minimizing energy loss. First-quarter bookings in this business were up 25% versus the second half of 2023 and revenue is expected to grow at a 18% CAGR from 2019 through 2024. In addition, Dover makes components for the biopharma industry. Well know all too well from Danaher that this industry has been going through an inventory destock for the past six to seven quarters, but finally it is starting to turn. Dover has seen bookings improve for two straight quarters and the book to bill in the first quarter was 1.08, meaning it is seeing more orders come in than being shipped. And there is CO 2 Systems, where there are regulatory tailwinds driving the transition towards natural refrigerants. A couple other things to note. First, Dover is active on portfolio management, divesting non-core businesses with less attractive growth profiles and using those sale proceeds to do bolt-on acquisitions in more attractive spaces to become less cyclical. The company recently completed the divestiture of De-Sta-Co, a business that sells industrial automation components that was within the engineered products segment, for a total enterprise value of $680 million, and it also made two bolt-on deals that added new businesses for its clean energy and fueling segments that added digital and recurring revenue streams to its car wash and retail fueling platform. Second, Dover is committed to returning its strong free cash flow generation back to shareholders. It recently announced and completed a $500 million accelerated share repurchase program with the excess cash it had from the De-Sta-Co sale. Dover is also a Dividend Aristocrat, with 68 consecutive years of dividend growth. Its current yield is about 1.1%. We are starting this position with an initial price target of $200, which is slightly above the consensus analyst target of $194 and represents about 22 times the consensus 2024 earnings per share analyst forecast of $9.10. But given where Dover is in its order cycle, there’s potential for positive earnings revisions in the quarters ahead that could drive the stock higher. DuPont We are finally able to add to our position in chemicals maker DuPont following a period of trading restrictions. However, we are keeping this buy on the smaller side following the stock’s rise over the past few sessions. We’ll be buyers again should the stock break below $80 per share, which is where we originally wanted to buy it after the puzzling muted reaction to the breakup news. We continue to see sum-of-the-parts upside following the company’s decision to break up into three separate publicly traded companies. More analyst upgrades and positive price target revisions are rolling in. Citi upgraded its Dupont rating to buy Tuesday with a price target of $95, up from $85. (Jim Cramer’s Charitable Trust is long DD and DOV. See here for a full list of the stocks.) 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