Well, thanks, everyone for being here. It's my pleasure to have up next, Rich Tobin, Chairman, President, and CEO of Dover Corporation. And so, yeah, Rich, I think one thing that's sort of exercising a lot of people's minds right now is, you know, health of the U.S. industrial economy, a lot of optimism. Last year seemed to end strong. PMIs were good two to three weeks ago. What are kind of your perspectives? You've got a very broad portfolio touching a lot of different parts of the U.S. industrial economy.
Sure. It feels eerily similar than it did this time last year. I thought the setup was good going into 2025, until we ran into tariff tumults in February, and it kind of upset the apple cart. So the difference going into 2026 than this time last year was interest rates are even lower than they were, so we were kind of betting on the come a year ago. But more importantly, we have seen an acceleration in orders leading into 2026 that we did not have last year at this time. So we were kind of betting on the come of what we thought the economic environment was gonna be in 2025. In 2026, we actually have hard data points that, generally speaking, in a normal year, we wouldn't have, right? We're, you know, fundamentally mostly a short cycle business.
In any given year, we would expect to see orders accelerate in Q1 for deliveries in Q2 and Q3. We actually had a lot of orders come in in Q4.
Mm-hmm
... we go in kind of a credit position from a backlog point of view, that makes us feel good for the setup for the year.
Realize it, it varies by product type and industry, but are there any kind of common threads when you talk to customers? Was it just the relief that tariffs were calming down? Was that a very big part of it?
Yeah, I mean, I think that we lost basically February to September last year, with everybody dealing with not only the absolute economic impact from the tariffs, but the fear of the long tail of the tariffs. I mean, you know, so we just lost a lot of time, and then we got a little bit of a squeeze into the end of the year. You know, generally speaking, we're a CapEx-levered portfolio, and so you don't really see a lot of CapEx get kicked off in Q4, right? Just like any corporate, you've got a budget, you get what you can do, you close up a lot of projects, and then you roll them into the next year.
You know, I think it was just a matter of a lot of lost time last year as everybody absorbed what the fear around the tariffs were, which generally, you know, knock on wood, didn't manifest itself into a lot of big problems. It made the water a little bit muddy.
Got it. And when you look across the various operating segments, which ones you kind of, I think you're guiding for all of them to grow this year.
Mm-hmm.
Which, you know, if you pick one or two, where you're most or least confident of that growth this year?
The two segments that should contribute the most top-line growth and the absolute profit growth will be in Clean Energy, and we can discuss the components of that, and it will be in Climate and Sustainability. On the Clean Energy side, we've transformed that segment, being what traditionally been the Fueling Solutions portfolio. We've basically doubled the size of that business by doing a lot of M&A around the gas complex and cryogenic components. So half of the revenue... I mean, we went through a period, I was just saying upstairs, I remember being here in 2001 when ICE was uninvestable, right? EVs were taking over the world. Every auto OEM was gonna build a battery plant, so get out of any exposure to ICE. Well, the worms turned a little bit here.
And the good news is, because it was almost an uninvestable end market for a period of time, the deferment of CapEx has built up into the system. So not only is there a requirement for refurbishment of the installed base, everybody woke up and discovered that profit margins on gasoline, that Costco has proven, has been pretty lucrative. So there's a lot of... In retail world, there's a lot of, of the adoption of that particular model. So we would think that we're likely gonna go into a three-year upcycle on Fueling Solutions, and, that's a pretty profitable business for us. On the cryogenic components portion of the portfolio, that's more of a secular play, so we've made a relatively large bet on the gas complex.
So LNG all the way to propane, I don't need to tell anybody here about the amount of money that's going in and building out those positions. So, so we feel really good about that. We've done a lot of restructuring there. So either we, you know, in any given year, we have a lot of roll forward, kind of non-revenue benefit, a rollover of us working on the portfolio. We'll be complete with that. We did nine acquisitions, I think, or nine factories in cryogenic components. We're shrinking down to four.
Mm.
We'll be complete with that footprint consolidation at midyear this year. So a good portion of our roll-forward restructuring benefit will manifest itself there. If I skip all the way to the other end of the portfolio in climate and sustainability, we've got the brazed plate heat exchanger business. I'm not gonna pound away, you know, it's got data center exposure. I think that we've invested in capacity expansion. Despite the rundown after the big heat pump wave, we continued to invest in capacity, and that's been proven to be the right decision. So we're looking at between the heat pump market coming back somewhat and the, and the adoption of brazed plate heat exchange rs into district heating and into data centers. We're looking for some really good growth there. And on the refrigeration business, we've got two businesses in there now.
So there's the traditional retail refrigeration units. I talked about it a lot last year. Retail customer was the one that bore the brunt of tariffs last year, so a lot of CapEx was deferred in 2025. That's why we basically were saying in Q4, we're gonna post a big number, and we saw the backlog, it just slid to the right. Well, that has continued through Q4, and we expect to grow quite a bit on the retail refrigeration side going into 2026. And we transferred a product a couple of years ago for CO2, kind of top-of-the-source systems business. We brought that technology from Europe a couple of years ago. We've gone from zero to over $300 million of revenue in that particular business over the last 18 months.
Perfect. And then maybe, you know, which of the segments are you most worried about? I suppose Engineered Products, there's some, you know, you had the vehicle aftermarket was tough.
Yeah, I mean, I think that vehicle aftermarket, I don't think it's gonna shrink again this year, but it's levered towards Europe, and Europe is, it's hard to make an argument for retail demand in Europe right now, or anything around the automotive complex in Europe is going through some tough times. But I don't think it's gonna be nearly the headwind that we absorbed last year. Other than that, you know, I don't, we don't have a business that we're projecting to cycle down, meaning coming off of doing really well through a two or three-year period and coming off. We don't, there's not a business in the balance of the portfolio that we see it that way.
Great. You know, I think one other feature has been a lot of companies have been talking about is the cost inflation environment, and, you know, you'd mentioned tariffs a few minutes ago. Do you see any signs of kind of price fatigue among customers, or it's just harder to push up price because of what's already happened the last five years?
If you go look at our price-cost metrics over the last year, I think that we've been in a credit position, but we have not been a big price taker during this inflationary period. About 65% of our portfolio is subcomponents, so it's an industrial B2B sale rather than a retail sale, and the retail is where it's taken the brunt of the price increases. So, I think that we're in pretty good shape. I think it's healthy that this is probably the first year in three where we would expect unit volume to be the driver of revenue growth rather than dominated by price.
You know, when you think about sort of operating margins, yeah, I think you're starting out the year pretty muted on expansion. They were up a lot last year, guided to be up this year. So maybe help us understand kind of, you know, why the slowish start and sort of what drives that improvement in margins the rest of the year.
Yeah, I mean, you know, we— our incremental margins over the previous 36 months, despite having, I think, 1% top-line growth, have been pretty healthy. And a lot of that has been the restructuring roll forward that we've done in the past, and I think that we had a really healthy mix of revenue last year with biopharma and thermal components and those parts of the portfolio being disproportionate in driving the top line. This particular year, the growth is more widespread across the portfolio, so we'd expect incremental margin to come down a little bit. Margin of the total portfolio will move up, but less so, driven by mix. Having said that, it's early days, so we'll see.
So if you take our EPS guidance and you back out kind of the restructuring roll-forward savings and you do the math, the incremental margin on the additional revenue is, it's good, but it's modest. Let's see how we do. I mean, predicting fixed cost absorption into the future is a little hard, just with the variety of products that we make, but potentially, we have some upside there.
You know, you've done a lot of heavy lifting, as you said, and there's some roll forward cost out this year. As you go through the year, should we expect a sort of a refresh of that, you know, trying to get all the businesses kind of into the 20s + margin range?
Yeah, I think what's different is because we get, you know, over the years of doing this, you know, how many years can you take out those kinds of, you know, synergy benefits across the portfolio. I mean, understandably, in the early stages, it was cleaning up the legacy Dover portfolio. So a lot of what we did in terms of back office consolidation and amount of footprint this past year was very much less on the legacy portfolio and very much on M&A, right? So, when we do M&A, I mean, we expect to extract synergies out of those targets. And like I said, I mean, in the cryogenic components, we knew we were buying a lot of small companies.
We generally leave them alone for the first year because we don't wanna break what we bought, and we wanna manage the customer relationship and everything. But in the background, we're working on, you know, do we need, can we do something with the footprint? And we, and we did quite a bit. So in the roll forward this year, 50% of the roll forward is from prior period M&A. And so we always have that opportunity to the extent that we're doing M&A going forward of here, of extracting the synergy benefit that's baked into those deals.
Got it. You know, you mentioned data center a little bit earlier, sort of obligatory, now to mention it.
Yeah.
But, maybe remind us, you know, the two or three major product exposures there-
Sure.
How large the data center exposure, sort of Dover-wide, will be this year?
Yeah, I mean, the primary exposures that we have is in thermal connectors, which is basically bringing the water to the chip, and in brazed plate heat exchanger s, which are both at the CDU and in the general infrastructure of the building itself.
Yeah.
They're both doing quite well. We expect both to grow going this year. But in the grand scheme of things, we're not, you know, an overly material supplier in to the infrastructure. So I'm not the one to... If you wanna talk about how long the cycle lasts, then, you know, you're gonna have to ask somebody else. We find it very attractive. We've also got minor products that we ship into it because the infrastructure itself, and we're talking about billions and billions of dollars there.
Mm-hmm.
And you know, I think we'll be opportunistic. But you know, in terms of M&A, I find it highly doubtful that we'll participate on that. The purchase price multiples are kind of prohibitive.
Got it. That's an area where there is a lot of capacity being added by you and your peers there. You know, is pricing still okay there, or you just see such a wave of capacity?
I mean, our businesses occupy niche-y TAMs at the end of the day.
Yeah.
The TAM is not big enough to attract a lot of competitors.
Yeah.
The bigger the TAM, the more opportunity is for everybody. So, by and large, what we're occupying right now fits that description. And so, you know, knock on wood, right now, pricing is pretty stable and everything else. But, you know, we're very cognizant about commoditization. You know, we've lived that before with, you know, your China exposure and so, you know, I think that we're careful about it, but at the end of the day, you know, a CapEx expansion for us, you know, we're not betting the balance sheet. I mean, these are projects that are $20 million-$30 million. They're not $1.5 billion-$2 billion. I mean, that's the beauty of the business model.
We can take hundreds and hundreds of small calculated bets as opposed to five massive kind of binary bets in the portfolio, and that's turned out to work okay so far.
You know, heat pumps, you know, you mentioned cyclicality just now. Heat pumps hadn't been growing very well, then a soft patch. You know, what kind of recovery do you think we could see there in SWEP, for example, in that part of their business?
Well, look, I mean, I would turn to the actual manufacturers of the heat pumps that are all basically calling the market up. I mean, it's... You know, we're not gonna return to the growth rates that we saw back in 2022 and 2023. I mean, look, regulated markets or markets that are incentivized through legislation, the beauty of it is when it's legislated, the volume's there. The bad part about it is the legislation change, and it's not there. I mean, there's no way that you cannot participate as the market's going up because you don't want to lose market share, and nobody's clairvoyant enough to know when the market's going down.
So to me, you take the profit margin while it's there, and hopefully, to your earlier point, you don't over-capacitize yourself and/or do M&A, badly timed M&A during those cycles. But, you know, overall, it is a, it is a known product that delivers efficiency. It, it's probably not gonna require the level of subsidization that it did in the past, and that's a good thing because then you just get stable growth over time.
Mm.
as opposed to these flopping around when different countries are incentivizing the product line.
And then within DEP, kind of what's the priorities there? Kind of help us understand how you're thinking about through-cycle growth for that business. There's been a lot of portfolio surgery done inside it since you became CEO.
Yeah, I mean, arguably, if you care about sum-of-the-parts , that it was arguably the lowest. It was the more capital goods exposed portion of the portfolio. I mean, it's down into the low teens in terms of the size of it in our portfolio now, so it's the biggest change that we've seen. I think that we made some well-timed exits out of the portfolio. And we did that. I think that people don't understand is that if we didn't think that those businesses that we monetized were strategically going to come under pressure into the future, we wouldn't have monetized them. We got the right price for it because they're old assets in the portfolio, so the tax leakage is pretty high, so we need a pretty good multiple.
But the reason that we monetized them is that looking over the horizon, we thought that in the future, we'd have a difficult time protecting the profitability, as opposed to, "Hey, you know what? Everybody thinks that that's a low volume of, you know, a low-value portion of the portfolio, so if you sell it, then magically, your multiple is gonna go up." That. We don't think like that. We do everything, you know, we manage this portfolio on projected ROIC of the individual company, and then we look at the strategic positioning from both a product point of view and from a competitive point of view, and whether we're advantaged or disadvantaged. That's the screen, not magic of sell your low-margin businesses because magically, your multiple is gonna go up.
We have businesses in our portfolio that are lower than consolidated margin, but the cash flow dynamic of those businesses, the ROIC, is superior to what pieces of the portfolio that optically you would look at and say, "Well, that's worth a lot because the margin's high." I mean, margin is great, but it's not, it's a piece of ROIC, it's not all of it.
When you look at that portfolio today, I mean, do you think you've kind of taken out most of what you wanted to with what you're assuming about kind of future growth and kind of structural changes?
Yeah. I mean, there may be some little minor pieces, but right now, we don't think that anything is structurally impaired from a product replacement point of view or from a market structure point of view. So, doesn't mean we'll double down and invest across the portfolio evenly, and we haven't.
Yeah.
If you look at our disclosures every quarter, we tell you where we're-
Mm-hmm.
-investing, and why we're investing there. And I think that our track record, you know, we have been investing in the higher growth, higher margin potential portions of the portfolio as opposed to pieces of the legacy portfolio.
And on that latter point in investments, you know, it's a mix of organic and inorganic. I think inorganically, the M&A market for the types of deals that you look for has been pretty quiet for some years.
Mm-hmm.
Any sign of that kind of improving now? And, if it doesn't, will you... You know, is it sort of tempting to step on the accelerator anyway or-
Well, I think that we've demonstrated a lot of patience sitting on $1.5 billion of liquidity for 18 months. Look, in 2025, there was. If you look at the M&A markets in total, you would say you read the paper, and it's a record year, but the deals that were there were very large. They were corporate breakups and very, then dominated by very large deals. The middle market, where we participate, there was very few. Some deals came in 2025. Unfortunately, the multiple on those deals was quite high, and we'll see if that's just because of scarcity value or have multiples just moved up again. I think it's too early to tell because the amount of deals that have been done-
Mm-hmm
... have been relatively low. But we go into 2026, where the deals that were done in 2025 went off at high multiples. Discount rates are projected to come down more. Equity markets are up, for the most part. So the setup for if you're gonna bring something to market in 2026, you know, it's green light. So the question is now, what are prevailing multiples going to be? The early signal is they're gonna be kind of high, but maybe with more deals coming, that'll put some top-line pressure on multiples paid. But it's February sixteenth-
Yeah
... so we'll see it over the next 180 days or so.
The point would be if the prices, for various reasons, stay high, probably stay patient and then a buyback towards the end of the year.
Yeah. I mean, look, at the end of the day, you have to have the discipline of, you know, you can't get caught up in it. Well, we saw that movie in 2001 and 2002, right?
Yeah.
I mean, there was a lot of deals that, you know, that prices were frothy and fear of missing out and all that stuff. And at the end of the day, capital return is always an option for us.
Mm-hmm.
You know, if that's the economics say that that's the trade, then, you know, it's not as if we're gonna, you know... Even with the deals that we've done over the last eight—we've financed the deals that we've done over the last 18 months with the disposals that we made. So our cash position and our liquidity position is actually improved by all of the cash flow that we generated last year. So that can't go on forever.
... One business we haven't touched on yet really is Pumps and Process, you know, extremely high margins. It's an area you presumably want to do M&A. It's one of those focus areas.
Mm-hmm.
You know, do you think there's a lot of margin runway left there, or it's more just a question of mix?
Yeah, I think it's more mix than kind of-
Okay.
I mean, we're north of 30 now.
Yeah.
We'll take 30 all day long and just grow the top line as quickly as we can. I mean, if we were to do M&A in there, I, the likelihood, it would probably be dilutive, I would imagine.
Yeah.
Because assets that generate margins north of 30 don't come available very often, and when they do, they're very expensive. So value creation is kind of tight.
Mm.
But we like the end markets. There's a lot that we have in that, in that particular portfolio, everything from biopharma to industrial pumps to polymer processing to components that go into turbine manufacturing. So, you know, I think that it's not like we have to go find a pump company that's accretive to the margin. That puts you in a little bit of a tight spot.
So overall, I suppose, you know, with a lot of the divestments having been made, you know, when we're thinking about that kind of longer-term algorithm for Dover earnings growth, you know, do you feel you're in a good spot now with the portfolio to get four to six organic annually? And then incremental margins, I guess, you know, you had the old goal-
Mm-hmm.
now a sort of forties number, I suppose, seems the right-
Forties a bit rich and incremental. Yeah, I mean, I'd like to, Julian, but, you know, that one, we'll see.
Okay.
Yeah, I mean, we like the portfolio as it is. I mean-
Yeah
... we like, we like the setup, we like the size of the company, right? That, that, that we have a highly cash generative portion of the legacy portfolio that basically feeds our endeavors for CapEx and M&A on where we would like to grow into. So barring somebody coming in with a knockout offer to monetize a piece of the legacy, then we're more than- as long as it's not strategically impaired, we like that algorithm. I don't think there's an argument to make it, to break the company and make it smaller. I mean, you know, I, I get it that it's all the rage now of, of deconsolidation and everything else. Okay, if you're, if you're a market cap of $100 billion up, that works.
Mm-hmm.
Go look at spin cos at market caps sub-
Yeah
$30 billion, 20. You know, it just... You cannot become irrelevant from a balance sheet point of view. It becomes, you put yourself in a very difficult position.
Good. Well, on that note, I think we'll switch now to, audience response survey questions, please. So the first one is around, do you currently own shares in, in Dover? So about 60%, more opportunity there. Second question, is around kind of general bias to the stock today. So slightly positive. Third question, is around kind of EPS growth for Dover versus the kind of multi-industry average through cycle. So about in line with, with the group. Next question, is around excess cash usage. So the usual sort of spread, but kind of 50%s, for M&A. The next question is around the valuation that Dover should trade at on kind of 2026, PE. So about 20, 19, 20 times-
I'll take 5. Sure. Yeah. Okay.
Yeah, that's a good result. And then the last question is around kind of what's the main headwind on the stock right now or anchor on the valuation multiple? So Conglomerate...
Always the same.
With the uplifting note, thanks so much, Rich, for being here again.
All right.
Thank you.
Good to see you.
Thank you.