Deutsche Bank is striking a cautious tone on Dover ‘s stock ahead of the industrial conglomerate’s upcoming earnings report. Jim Cramer is saying don’t fall for it. The firm’s wariness on Dover lands not long after the Federal Reserve began its rate-cutting cycle – generally seen as a positive development for economically sensitive corners of the market such as industrials. That’s because lower rates are typically good for businesses’ capital expenditure levels. And yet a recent pair of research reports on industrials – from Deutsche Bank and Barclays – paints a decidedly mixed view on Dover and the group overall, which includes fellow Club holdings Eaton and Stanley Black & Decker . The divide is readily apparent on Dover, which is one of our plays on data center buildouts to support the growth of artificial intelligence computing. Late Tuesday, Deutsche Bank listed Dover as a short-term sell idea, suggesting the company will report underwhelming results that may pressure shares later this month. Jim, on the other hand, rushed to Dover’s defense Wednesday. “I really, really don’t want to sell this stock,” he said during Wednesday’s Morning Meeting. “I think it’ll go much higher.” Analysts at Deutsche Bank listed a few reasons to support their short-term sell call on Dover, including the need to restate its earnings and guidance to account for the sale of its Environmental Solutions Group. While analysts estimates’ will need to be revised lower accordingly, this should not surprise the market because the sale was announced way back in July . Plus, Dover was right to divest this unit, which makes garbage trucks and trash compactors, in the first place because it’s a noncore business and the sale proceeds can be redeployed into more attractive opportunities. Analysts also argued that Dover may struggle to meet management’s upbeat outlook call book-to-bill performance. On its July earnings call , CEO Richard Tobin said he expects Dover’s book-to-bill ratio to be above 1 in the second half of 2024, a key threshold indicating more orders are being placed than filled. But analysts now see “downside risk” to Tobin’s assessment. Dover remains “one of the best-managed companies and they are not going to slip up on their execution here,” Jim argued in response. The Club remains long Dover because its thermal connectors used in data centers should continue to see growing demand, while its biopharma business also is in recovery mode. For its part, Barclays on Wednesday issued a middle-of-the-road view on Dover. The firm bumped its price target on the stock to $190 a share from $186, arguing there’s been a “positive tone” from the company regarding the organic sales growth and EPS outlook into 2025. Still, Barclays’ new target is on par with the stock’s price Wednesday, and it maintained a hold-equivalent rating. DOV YTD mountain Dover (DOV) year-to-date performance It’s not just Dover in the spotlight. Other industrial stocks in our portfolio…
Read More: No need to sell AI play Dover — and updates on 3 more industrial stocks