Dover (DOV) Q4 2025: Bookings Surge 10% as Backlog Strengthens 2026 Visibility
Dover closed 2025 with accelerating order momentum and margin expansion, positioning the portfolio for double-digit EPS growth in 2026. Management’s constructive tone is underpinned by broad-based demand, a robust backlog, and continued execution on cost and capital allocation levers. With no segment signaling material headwinds, the setup for the coming year is defined by operational leverage and disciplined capital deployment, though input costs and segment mix remain key watchpoints.
Summary
- Order Momentum: Bookings strength and high book-to-bill ratios underpin confidence in 2026 demand durability.
- Margin Expansion: Productivity actions and favorable mix drove segment margin gains despite input cost and commodity exposure.
- Capital Deployment: Active M&A and share repurchases signal continued portfolio evolution and balance sheet flexibility.
Performance Analysis
Dover exited 2025 with its highest quarterly organic growth rate of the year, driven by secular-growth markets and improving trends in retail fueling and refrigeration. Bookings rose 10% in Q4, with every segment contributing, and the consolidated book-to-bill ratio exceeded one, signaling ongoing demand strength. Segment EBITDA margins expanded 60 basis points to 24.8%, reflecting volume leverage and ongoing productivity initiatives. Free cash flow conversion improved, with Q4 delivering 23% of revenue and full-year free cash flow up nearly $200 million year over year, despite increased capital spending on growth and productivity projects.
Segment performance revealed both legacy and growth dynamics: Engineered Products revenue declined on lower vehicle services but saw margin improvement from cost actions and mix. Clean Energy & Fueling delivered 4% organic growth, led by North American retail fueling and clean energy components, though margins were pressured by vehicle wash solutions. Imaging & ID posted steady growth and sustained strong margins, while Pumps & Process Solutions led with 11% organic growth, fueled by biopharma, data center cooling, and infrastructure demand. Climate & Sustainability Technology grew 9% organically, with double-digit gains in CO2 refrigeration and robust backlog in heat exchangers for data centers.
- Bookings Acceleration: All five segments posted bookings growth, with Q4 book-to-bill at 1.02, supporting a constructive 2026 outlook.
- Productivity Leverage: Carryover benefits from prior restructuring and mix shift drove margin gains, especially in lower-margin segments poised for further improvement.
- Cash Generation: Strong free cash flow enabled self-funded CapEx, M&A, and buybacks, preserving capital allocation flexibility for 2026.
The quarter’s results highlight Dover’s ability to convert top-line growth into margin and cash flow expansion, while maintaining a disciplined approach to capital and operational execution.
Executive Commentary
"Our strong bookings rates which were up 10% in the quarter and 6% for the full year, continue to support underlying momentum across the portfolio, providing confidence in the durability of the demand as we enter the new year."
Richard J. Tobin, President and Chief Executive Officer
"Free cash flow in the fourth quarter was $487 million, or 23% of revenue. The fourth quarter was our highest cash flow quarter of the year, in line with historical trends. We were encouraged by Dover's full-year free cash flow result in 2025, which came in at 14% of revenue, an increase of nearly $200 million over the prior year."
Chris Wonaker, Senior Vice President and Chief Financial Officer
Strategic Positioning
1. Backlog-Driven Demand Visibility
Q4’s order surge and a seasonally high book-to-bill ratio provide Dover with substantial visibility into 2026 revenue, especially in Climate & Sustainability Technology and Pumps & Process Solutions. Refrigeration, for example, is sold out for Q1 and booking well into Q2, an atypical state that underscores pent-up demand and capacity constraints. This backlog strength reduces near-term revenue risk and supports management’s constructive guidance.
2. Margin Accretion Through Productivity and Mix
Margin expansion is being driven by both structural cost actions and favorable mix shift into higher-growth, higher-margin platforms. The company expects $40 million in carryover profit from 2025 productivity actions. Clean Energy & Fueling, while still below its long-term margin target, is expected to move into the low 20% range in 2026 as restructuring and integration benefits materialize. Segment mix will be a key determinant of incremental margin realization, with management expecting back-end loaded gains as cost initiatives take full effect.
3. Capital Allocation Optionality
Dover’s capital deployment in 2025 was balanced between organic investment, M&A, and share repurchases, with over $700 million deployed in strategic acquisitions and $500 million in buybacks. The company’s “dry powder” entering 2026 is nearly unchanged, reflecting self-funded growth and a conservative leverage posture. Management signaled an active M&A pipeline, focused on bolt-ons in priority segments, while maintaining divestiture optionality if needed for portfolio optimization or funding larger deals.
4. Secular Growth Exposure and Portfolio Shift
Roughly 20% of Dover’s portfolio is now tied to secular growth markets—data center cooling, biopharma, CO2 refrigeration, and clean energy—growing at double-digit rates. The legacy engineered products segment now represents less than 15% of the portfolio, reflecting a deliberate shift toward higher-growth, higher-margin businesses. This repositioning has improved the company’s through-cycle growth rate and margin profile, with management citing a 3% to 6% long-term organic growth “entitlement.”
5. Risk Management and Pricing Power
Input cost inflation, especially in steel and copper, remains a watchpoint, but management expects to offset 1.5% to 2% of cost increases through pricing. The company is prepared to take further pricing action if commodity costs accelerate. Exposure to Europe and certain legacy markets (vehicle services, can making) is being actively managed, with limited topline drag expected in 2026 due to portfolio mix and margin discipline.
Key Considerations
Dover’s Q4 results and 2026 setup are defined by synchronized demand across secular and legacy markets, disciplined execution on cost and capital, and a portfolio increasingly weighted toward growth platforms. However, the company’s ability to sustain margin expansion will depend on the mix of volume growth, realization of productivity benefits, and responsiveness to input cost volatility.
Key Considerations:
- Backlog Conversion: Unusually high refrigeration and heat exchanger backlogs must convert to shipments without operational bottlenecks to realize full-year guidance.
- Segment Mix Impact: Growth is concentrated in lower-margin segments, requiring strong operating leverage and successful productivity execution to meet EPS targets.
- Input Cost Management: Commodity inflation in steel and copper could pressure margins if pricing power is not sustained throughout the year.
- M&A Integration: Recent acquisitions in Pumps & Process Solutions are outperforming, but synergy realization and integration remain critical to sustaining above-market growth.
- Capital Allocation Discipline: With continued buybacks and M&A, maintaining investment grade leverage and funding flexibility remains a focus.
Risks
Key risks include potential for input cost spikes, especially in commodities, operational execution risk in converting backlog to revenue, and macroeconomic or regional slowdowns, particularly in Europe and legacy markets. Management’s guidance embeds prudent conservatism, but any shortfall in volume leverage or cost recovery could pressure margins and EPS delivery. Ongoing restructuring and facility transitions may create near-term fixed cost absorption challenges.
Forward Outlook
For Q1 2026, Dover expects:
- Modest volume ramp, with seasonality consistent with prior years and Q1 representing a production-heavy, shipment-light quarter.
- Backlog conversion in refrigeration and data center cooling to support strong Q2 and Q3 deliveries.
For full-year 2026, management guided:
- Adjusted EPS of $10.45 to $10.65, representing double-digit growth at the midpoint.
- Free cash flow conversion of 14% to 16% of revenue.
Management highlighted several factors that could drive upside:
- Further acceleration in secular growth platforms and backlog build, especially in Climate & Sustainability Technology.
- Potential for incremental pricing action if commodity cost inflation persists.
Takeaways
Dover’s Q4 performance and 2026 guidance reflect a portfolio in transition, with secular growth engines offsetting legacy headwinds and operational discipline driving margin expansion.
- Bookings and Backlog Strength: Order momentum and high backlog provide visibility, but execution on backlog conversion and cost actions will be decisive.
- Capital Allocation Optionality: Self-funded growth and a balanced approach to M&A and buybacks support long-term value creation, while portfolio discipline remains intact.
- Secular Growth Platforms: Exposure to data center cooling, biopharma, and CO2 refrigeration is driving above-market growth and margin improvement, positioning Dover for multi-year outperformance if trends persist.
Conclusion
Dover’s strong finish to 2025 and robust 2026 setup are anchored by order momentum, disciplined cost management, and targeted capital deployment. The company’s evolving portfolio mix and operational leverage provide a solid foundation for double-digit EPS growth, but sustained execution on backlog conversion and input cost management will be critical to delivering on guidance.
Industry Read-Through
Dover’s results signal broad-based industrial demand resilience, especially in secular growth verticals like data center infrastructure, clean energy, and biopharma manufacturing. The company’s backlog-driven visibility and margin expansion through productivity offer a template for peers navigating mixed macro conditions. Retail fueling’s CapEx cycle revival and refrigeration’s backlog surge highlight emerging end-market recoveries that could benefit related suppliers and OEMs. Input cost pressures remain a universal risk, with pricing power and productivity actions separating outperformers from laggards.