Dover at Baird Conference: Strategic Shifts and Growth Prospects

On Tuesday, 11 November 2025, Dover Corporation (NYSE:DOV) presented its strategic vision at the Baird 55th Annual Global Industrial Conference. CEO Rich Tobin outlined the company's approach to portfolio management, margin expansion, and growth, emphasizing a careful strategy for mergers and acquisitions (M&A). While highlighting Dover's strong growth areas, Tobin also addressed challenges related to organic growth.

Key Takeaways

• Dover is focusing on margin expansion and strategic portfolio management, prioritizing return on invested capital (ROIC).
• The company has completed a $500 million accelerated share repurchase (ASR) and maintains $6.5 billion for future M&A.
• Growth is expected in sectors like CO2 systems, thermal connectors, biopharma, and cryogenic components.
• Dover is leveraging AI to enhance efficiency in centralized processing centers.
• The company anticipates strong Q4 organic growth and positive momentum into 2026.

Financial Results

• Dover reported significant improvements in margin structure, targeting 20% margins in its core Refrigeration business by 2026.
• Conversion rates have surpassed 35% for the past five quarters, driven by cost actions and portfolio optimization.
• A $40 million cost reduction initiative has been implemented this year, with ongoing annual targets of $30 million to $50 million.

Operational Updates

• Dover is actively managing its portfolio, categorizing businesses as "growers," "changers," or those "harvested for profitability."
• The company sold its automation business, Dostaco, and a garbage truck body business, both at favorable valuations.
• Dover is expanding in Pumps and Process Solutions and transforming its Fueling Solutions segment.

Future Outlook

• Dover expects Q4 to be its strongest organic growth quarter, with core business growth projected at 4% to 6%.
• Key growth platforms are experiencing high teens growth, with retail refrigeration and precision components anticipated to grow rapidly in 2026.
• The company foresees increased demand for infrastructure to deliver gas to turbines.

AI Implementation

• Dover is centralizing non-customer-facing activities to enhance efficiency through AI.
• The company sees opportunities for AI adoption in centralized processing, improving manual processes.

Q&A Highlights

• Rich Tobin emphasized the importance of extracting synergy value across Dover's portfolio.
• He addressed concerns about organic growth and noted no significant cyclical downturns heading into 2026.
• Tobin stated that Dover's stock is undervalued from a competitive perspective.

In conclusion, Dover Corporation continues to refine its strategic focus, leveraging its strengths in niche markets and technological advancements. For further details, refer to the full transcript below.

Full transcript - Baird 55th Annual Global Industrial Conference:

Mike Allen, Analyst, Baird: Hi, everybody. Mike Allen with Baird. Thanks for joining another session with us. We are in the Dover session. And Rich Tobin, CEO Jack is in the crowd hiding.

You could have sat next to me, made the stage look a little more attractive. We're going to do a complete fireside chat. So we'll open with some portfolio stuff and vision for what's next, and then we're just going to kind of tick through all the topics. So any questions you have, raise your hand, I'll call on you or send a question through the e mail that's in front of you on the cards, I'll make sure to weave it in. So Rich, thanks for your time.

I know we've got some highlights on the screen here for people who want a reference point, but maybe we start high level, which is just when you think about the decisions you've made over the last few years when it comes to portfolio exits, portfolio adds, Maybe just level set people on what you're trying to accomplish and what your vision is from a cohesiveness for the company on a forward basis.

Rich Tobin, CEO, Dover: They have been good overall, not brilliant, but not disastrous, I put it in that category. In terms of what we've done from an M and A point of view, both in and out, I think that we've been patient, especially with the out. We used to get, back in the day when I first started, a lot of why don't you sell X, Y and Z. And we said at the time that we didn't we would not consider selling anything out of the portfolio unless it was strategically impaired because we thought that there was value to be unlocked to the portfolio. And so we spent 5 or 6 years doing that.

So I think that we made our first really material disposal the beginning of last year. And then we did a subsequent one at the end of last year. We can talk about kind of the why. Look, we don't we're very much return on invested capital focused, and we're very much sum of parts focused. So I don't compare the individual businesses within the portfolio against each other.

We compare them to their comps that we can find out in the marketplace just in terms of performance, right? So margin potential, growth rate, everything else. Then we also have a lens of kind of a longer term strategic view. So what is the competitive set? What's the technology look like?

What's happening to the end markets? Are these assets going to become can we extract more value over a rolling three year period? Or do we think that we're going to run into an issue where they're going to become impaired, whether that's because of cycle or technology change and the like? So we've had that view on the portfolio for some amount of time, and then we can bucket the individual companies into the kind of the growers and the changers and then some that we're harvesting for profitability, and then we can be opportunistic in terms of this is on the outside in terms of the selling. So because we do focus on ROIC and selling parts, we had targeted two businesses in the portfolio, one that had Tier one OEM auto exposure, which we didn't think was attractive for the long term.

So we monetized that in February 2024, which is our automation business, Dostaco, at a very good multiple. And then later in the year, we sold our garbage truck body business that we had doubled the profitability of that business in the previous three years. But because of sum of parts multiple, we think to the extent that we can find a buyer that we should monetize that one, and we did at a very reasonable multiple. So is there more to do there? Yes.

But it's the devil's in the details. Selling things are easy on the cheap. Selling things and getting the right multiple for it take time, and you need to be patient. On the M and A side, clearly, we want to get exposure to markets that we have conviction that they're going to grow over time. We like the competitive set in terms of the competitive stack, and we think that we can extract margins out of it.

We've been buying a lot in our Pumps and Process Solutions segment over time. And I think to a certain extent, we've transformed our Fueling Solutions segment, which was overexposed to retail fueling, which if you guys remember three years ago, EVs were taking over the world valuations of that business were relatively low. We were making the argument that there's very few competitors and then we can extract a significant amount of value out of it. So we kept it during the time rather than selling it out of the portfolio, and then we transformed it by buying through M and A a significant entry point into the, let's call it, the gas complex. We're trying to mix up.

We're trying to move into areas that we've got conviction that are growing and that Dover has a right reputationally to operate in.

Mike Allen, Analyst, Baird: I mean it feels like you're moving away from cap goods as a generic statement and moving far more into component businesses, small solution subsets. And even some of the more recent ones like Secora, you've got ways to combine these things into a maybe more unique way into the marketplace, right?

Rich Tobin, CEO, Dover: Well, I mean, I think that I would describe it as that we're not afraid of small TAMs. I mean you hear a lot of this thematic investing and I want to be in water or I want to be in electricity. Part of our business model is we're not afraid of a small TAM. If we think that we can enter into a small TAM where generally speaking, there's very few competitors and those competitors are small, that the advantage that we have of scale allows us to extract disproportionate profits out of it. So you find niche markets like what we did in Secora, which inspects high voltage cable power solutions.

We like the end market for its growth aspects, and we like the market because, by and large, the competitors were all relatively small private companies, which we think that we can effectively compete with.

Mike Allen, Analyst, Baird: That makes sense. And how do you think about well, we'll get it out of the way with here, right? I mean you announced an ASR last night, I think, close close. Why now? And what does that say about what the actionability looks like, much less how much firepower you have?

Rich Tobin, CEO, Dover: Far be it for me to be the first CEO that says that our stock is undervalued. But I mean but if we look at it from a competitive point of view, it is undervalued. Undervalued. So as part of the M and A process, we always look at, okay, we can do this with our capital and we can buy back stock right now in terms of relative valuation that we think that for two reasons. We think the stock is undervalued so that and we're very long liquidity right now from a balance sheet point of view from the sales that I described before in the previous year.

And I guess more disappointingly, M and A so far this year has been dominated by very large transactions. There hasn't been a lot of assets. There's lots of number of assets to look at, but actionable assets of medium scale. There hasn't been quite a bit. And I guess, disappointingly, valuations are very high.

I think we're coming out of a period in industrial world where top line growth has been muted, for lack of a better word. Balance sheets are in very good shape in corporate America. So with a paucity of assets that are coming on to market so far this year, multiples look like they did back in the free money era, unfortunately. So when I compare prevailing multiples versus intervening on our stock price, then it looks better for us to continue to do so. So I'm not exiting M and A.

Secora was not a public transaction. We did that on our own, and we can continue to do that. But the fact of the matter is, is the multiples in 2025, if anybody thought they were coming down, they're not.

Mike Allen, Analyst, Baird: But it's not like a $500,000,000 buyback, which you've already completed, is constraining you if that market changes in any I think

Rich Tobin, CEO, Dover: it took our firepower down from $7,000,000,000 to $6,500,000,000 So I think that from a balance sheet perspective, we're in pretty good shape. If I go back and look between 2018 to today, we have self financed all of our M and A through operating cash flow and disposals. So the balance the leverage in our balance sheet has not changed at all.

Mike Allen, Analyst, Baird: Maybe switch gears here and have a same similar thematic conversation, which is we just talked about what we're trying to accomplish with the portfolio. Maybe talk the same thing on the margin structure, which, as you know, I'm of the opinions underappreciated with the trajectory you're on. But maybe talk what you're trying to accomplish, measures of success so far and what you think the end game looks like.

Rich Tobin, CEO, Dover: I think the business model that we described has worked and has runway to continue to work. There's no reason for Dover to exist unless we can extract synergy value across our portfolio. And by and large, we do that every year. So we've already announced $40,000,000 of cost actions that we've taken this year that roll forward into next year. So I mean I coined the term, it's non revenue related profit.

Every given year, if we run this thing correctly, we should have an element of profitability that is not contingent upon revenue growth. So in a year so if our conversion, I think our old targets used to be 25% to 35% conversion, well, that's stale now. I think for five quarters in a row, we've been in excess of 35%, largely because of the mix up of the portfolio, augmented by the cost takeout that we've done across the portfolio. I don't see that runway. I think we've been averaging between 30,000,000 and $50,000,000 of raw cost takeout every year.

We're not at the end of the runway there. So both organic investment in new products and new entries into market, inorganic investment where, by and large, everything that we've done has been either has been outgrowing the portfolio or it's been margin accretive to us on inbound M and A. And our ability to extract synergy value, I think, is something that's led to, on average, above 10 EPS growth every year.

Mike Allen, Analyst, Baird: And I mean if you think about the $40,000,000 you just referenced as well as the run rate, the exit rate that 3Q performance and 4Q guide imply, it implies a pretty healthy run rate with more to come. And so you're going to get the incrementals. You've got the €40,000,000 I don't think you believe that's all you can extract next year. It's just what you've executed on. Is mix an issue as we move into next year?

Or how should we think about that?

Rich Tobin, CEO, Dover: Yes. It's a funny one because you try you can't you have margin targets, but you can't manage to margin because the fact of the matter is we've got a variety of different margins in the portfolio, and it's not like we run around saying stop growing because you're dilutive in any given year. As I look forward into this year, I mean, we've got our growth platforms. Four out of five are margin accretive to the business. We expect the fifth one will be margin accretive probably exit '26, maybe mid-twenty seven.

We should grow quite a bit in our core Refrigeration business. The good news about that next year is while it may be margin dilutive, it will boost the top line from an organic point of view and those of you who followed over for a long period of time. And don't worry about 8% margins anymore, where our expectation is to do 20% in 2026.

Mike Allen, Analyst, Baird: Yes. No, that makes a lot of sense. And before we dig into some of the moving pieces, maybe just touch on how you think about the long term growth algorithm and maybe put that in context of how you're looking at the cycle holistically as we start normalizing the end markets.

Rich Tobin, CEO, Dover: Yes. I mean at the end of the day, from a communication point of view, I think that the error that I have made in the past is in working on the portfolio, some of the actions that we've taken has actually reduced the revenue, right? We've just basically if I think about fueling solutions for we've probably taken out between $150,000,000 and $200,000,000 of revenue over the past four years because the economics of that revenue were poor. And I think it probably should have been a little bit better communicating with that because everybody points to the organic growth rate and says, it hasn't been genius, right? It's been relatively low over time.

I would say conversely, the argument is despite having a lower top line because of the accordion effect of the portfolio, our earnings momentum hasn't changed at all. I think right now, sitting here today, I am unaware of any portion of the portfolio going into 2026 that is in cycle down. So that's kind of a nonmacro, right? Let's not call the macro for 2026 yet. Let's just talk about the individual end markets of the individual pieces.

It's not as if we had in years past, the heat pump roll off or the can making roll off or the biopharma roll off. We don't see that in 2026. So if I take even over the last three years and I remove kind of the cycle down portions of the portfolio, the core grows reasonably well at very good incremental margins. And that looks like the setup. We're going to see.

I mean, we only got I mean I know what October is, and October has been right on what we expected it to be. My expectation is that Q4 will be our best organic growth month or quarter of the year. And based on what we can see in bookings, I think we should be in good shape at least of getting an understanding of how we're going to enter into 2026.

Mike Allen, Analyst, Baird: That makes sense. Anything you would point to about the structural profile of the company that shifted over the last two, three years? I mean with the exit of selling ESG when you did was pretty well timed, bringing in what are probably higher growth platforms. Does that mix up with that growth? I mean you would have talked to four to 6% before.

Does that move you to the upper end of that if the backdrop is normal? Or are you still kind of firmly in that range?

Rich Tobin, CEO, Dover: Yes. I think we'd like some latitude before we give out our yes, I mean, the core growth of the business should be in the 4% to 6% range, right? But you're going to have volatility because of changes in the demand cycle. Strangely, with very few exceptions, we haven't had any markets where we've underperformed the underlying demand in the marketplace. But when biopharma kicks off, we need to extract as much profits as we can.

The fact of the matter is when it cycles down, you've got bad comps and then negative growth in those particular businesses. But I don't think we should apologize for a so called over earning in periods of secular growth for whatever the underlying reason. As I mentioned before, though, we've known that in any given year of where we were in the cycle, and I think that we've reasonably forecasted that. This is the first year in many years that we can't point to a portion of the portfolio of exposure where that's probably going to cycle down next year.

Mike Allen, Analyst, Baird: Yes. And that's, I think, the particularly encouraging thing going into next year, right, where maybe you don't know what the upside looks like, but you feel at least contained on the downside. You're planning for some volume growth. And then we'll see what the market bears from there.

Rich Tobin, CEO, Dover: Well, based on our margin based on the move in margin from 2018 going into 2026, you need significantly less top line you have to underwrite significantly less top line growth to extrapolate the earnings. At the end of day, it's the good news. So the margin for error that we would have had back in 2018, '19 and 2020 has been reduced significantly because of the fact that the margin is so much wider and it translates into the cash flow of the business. So like I said, we used to give out 25% to 35% in incremental margin. I think that's probably stale this time.

Mike Allen, Analyst, Baird: And order trajectory as you move into next year here, comment on 4Q being the strongest growth. I'm assuming that was more revenue or is that revenue and orders? And then well, I'll let you answer that and then I'll follow on.

Rich Tobin, CEO, Dover: Sure. Yes, it's revenue, right? I mean we didn't if you go take a look at the bottom on the revenue growth, we said 4% to six all in, right? And we're clocking at 1% organic year to date. So that implies that you're going to see a better organic number in Q4, for sure.

Mike Allen, Analyst, Baird: So when you look at the where you've been putting your capital dollars and where you've been focusing your growth, talk about the disparity of what you're seeing in those four, five, whatever it is, growth of businesses versus what you're seeing in the remainder of the portfolio. And examples, momentum, however you want to frame it.

Rich Tobin, CEO, Dover: Yes. I mean, look, at the end of the day, sometimes it's the law of small numbers, right? So you see numbers out there. We've entered into the thermal connector business, right, which essentially was sub-ten million dollars in revenue. It's significantly larger than that.

So you get some pretty heady percentages on that. You look at CO2 systems, that's a brand new product that we brought from Europe to The United States, where had virtually $0 of revenue in that eighteen months ago. And now we're cruising to $200,000,000 and exit this year. So those are both organic plays. On the inorganic side, knock wood.

I mean we entered into cryogenic components early, arguably. So we didn't have a lot of competition in buying some of those assets. Fortunately, everybody knows about it now, and that's growing really well. So if you look at I don't think we have the slide here. But if you look at our presentations, we give you some growth platforms, and then we reference the we're talking high teens depending on the size of the business.

So they're doing reasonably well. The only headwinds that we've had this year has been in vehicle services. So that is a business of two post lifts and wheel changes and that type of business. It's levered towards quite a bit towards Europe. That's been down just because of the whole auto complex is under duress.

And the call that we missed this year would be in retail refrigeration. So I'm not talking about the systems business, which has done incredibly well for us. I'm talking about the in store. It's at a twenty year low this year. We had absolutely zero indication that, that was going to happen at the beginning year.

But logically, when you think about it, in terms of our customers, the ones that have suffered the most in terms of the tariffs has been retail food because it put a squeeze on margin. And what's happened there is you've had a deferment of CapEx. I don't think you're going to see that in Q4. So the good news is we think it's just been a deferment. And I would expect that's probably going to be one of our fastest growing businesses in 2026.

Mike Allen, Analyst, Baird: So what are you worried about going into next year then?

Rich Tobin, CEO, Dover: Worry about everything. I mean it's a lot of balls to keep in the air. Macro aside, which we're not in control of

Mike Allen, Analyst, Baird: mean it feels like No. You have a very limited time,

Rich Tobin, CEO, Dover: But I mean, look, what I worry about is by the time we get I would argue, by the time we get to giving out guidance for next year, we'll probably be better than midpoint for organic revenue growth. We'll probably be better than midpoint in margin expansion and probably top quartile in EPS expansion. Do you There's some pretty lofty targets that we're probably going to have

Mike Allen, Analyst, Baird: And you're framing that relative to benchmark or relative to your long term targets?

Rich Tobin, CEO, Dover: Relative to benchmark.

Mike Allen, Analyst, Baird: Got it. Yes, makes sense. So maybe let's go through some of those pieces. The biopharma side of things, we're starting to see the growth and really strong growth off a tougher base for a bit there. But what are you seeing on the biopharma side?

And how do you think about the sustainability of that piece or at least tracking to normal?

Rich Tobin, CEO, Dover: I think that what you saw in Q1 of this year was almost a revelation that we went through being in a period of having too much inventory in the system due to COVID to an overcorrection in the drawdown on the inventory in the system. So you had a large spike in demand into the first quarter of this year. The good news is it went like this, and then it stabilized. So we've been clocking every quarter, and I expect to clock this quarter with growth in biopharma. It's and what that means is because this is a single use product is that the systems where our components attach to are running out So the biogens in the world and the Lonza's of the world are just running their reactors and they're making their product, and they're using our product, which is good news.

What is still not returned yet is kind of venture capital biopharma because that is very much tied to interest rates. We would expect that to improve going into 2026 and 2027.

Mike Allen, Analyst, Baird: But a couple of the other growth areas. If you think about the five or so CO2, thermal connectors, biopharma, reference those. How about precision components and then the clean energy Sure.

Rich Tobin, CEO, Dover: Yes. Look, I mean, I can go through all the growth platforms. You can see it in the slides. The percentages will come down because the law of small numbers as those businesses get bigger. But in terms of the trajectory of themselves, we don't see any slowdown in CO2 systems.

We don't see a slowdown in biopharma. We don't see a slowdown in thermal connectors. We expect in Precision Components to grow quickly in the 2026, and I'll explain why in a second. And in cryogenic components, we don't expect the growth rate or the demand to change, right? So you've seen all the announcement, the LNG trains and everything else.

That's kind of the ecosystem that we're selling into. The interesting one for us is you see a lot about power, the power complex. And so you see these everybody wants to buy turbines and everything else. Well, we're a supplier into that space on the internal components. And what's interesting is that we can see the demand from the turbine manufacturers, both steam and gas, and we're selling into that.

What we don't see yet is the demand for the infrastructure to deliver the gas to those turbines. And maybe it's come to lead because of lead times and the turbines So our expectation is that the next demand cycle, you've got to deliver the precursor, which is natural gas or steam to the turbine itself. And really, right now, in terms of build out of kind of the pipeline system to deliver that energy, it's lagging. So we're making a bet, and I think that with pretty good belief that, that's on the come. And based on our market checks with the suppliers that sell into that space, it looks like back 2026, that should take off.

Mike Allen, Analyst, Baird: And that's part of what the growth initiatives within that broader fueling platform of yours has been tied to, right? That's correct. Yes. No, that makes sense. The any reason any of the stressed areas don't see at least stabilization step up?

You talked refrigeration, lift. I mean it sounds like auto outlook looks pretty stable. All else equal, maybe a little downdraft in Europe.

Rich Tobin, CEO, Dover: I don't think it's going to get worse. We've done if you look at it, it's been a little bit of a headwind on the top line. But from a margin point of view, we've been taking cost actions in advance of that. So our margins are actually up a little bit in that segment despite having in both segments when we had some negative revenue growth. And that's back to what I said before.

If you've got non revenue related kind of synergy cost savings, you can kind of weather the storm with the volatility on the top line. If you don't, you're going to go up and you're going to go down and you're going to see incrementals and decrementals. Our incrementals are actually going up despite the fact that we've had some headwinds on the top line.

Mike Allen, Analyst, Baird: And a lot of the Baird analysts are asking a similar question here. I know you talked to Thermal and you talked to the eventual catch up on the gas side for you all. But when you think AI, what are you guys doing internally to implement it? Are you seeing any gains? Anything that you would point to that's relevant?

Rich Tobin, CEO, Dover: Let's put the product issue aside because we've got so many products, right? What I did is I put a slide in the last quarter, which probably is not well understood and is part and parcel to the margin expansion that we've shown here, is we've done a ton of work of extracting synergy value across our portfolio. So we have swept away all of the noncustomer facing activities of all these operating companies. So think about AP, AR, insurance, expense reports, tax, all of IT. We've swept that out of the operating companies into centralized processing centers.

We did that because we're more efficient because we want the people that are running these companies to spend 99% of their time making their product, engineering new product and working with their customers and not running around wasting their time with back office keystrokes. The good news about that investment is, a, we've extracted the synergy value of doing that. The better news is we've centralized it. So we've got basically a way that we can introduce AI into centralized processing. It's very nice to say AI, but unless you've got it in centralized nodes, it's so fragmented, it's never going to work.

So we believe that the low hanging fruit for AI implementation for us is to adopt AI on what is generally just some very manual processes that we've got a lot of people working on.

Mike Allen, Analyst, Baird: No, that makes sense. And then the fueling piece here, maybe just talk to the traditional fueling piece and why there might be a little faster growth entitlement over the next couple of years than maybe people realize?

Rich Tobin, CEO, Dover: Well, we had a very long deferred capital cycle because everybody was struggling with EVs taking over the world. So if you were a retail operator, how are you deploying CapEx to an area where everybody was underwriting negative growth into the future? Well, I think that we're beyond that now, number one. And number two is everybody's gone and taken a look how profitable sales of fueling using fueling as a way to drive sales. So Costco is really the industry benchmark.

Costco has been enormously successful by revitalizing their fueling points of driving revenue into their stores. And that is not lost on Walmart and Speedway and Buc ee's and everybody else. So I think that we're in a pretty good cycle here.

Mike Allen, Analyst, Baird: And Buc ee's is coming to Wisconsin. And Buc ee's coming to Wisconsin. Yes, there you go. With that, please join me in thanking Rich and the Dover team for their time today.

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