Bloomberg Businessweek - USA (2020-05-04)

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64

ILLUSTRATION

BY

GEORGE

WYLESOL

There’s never been a better time to not

be in the energy business.

Withthecoronaviruspandemiccrip-

plingdemandanda dearthofstorage

capacity complicating the technicali-

ties of trading contracts, the price of

crude oil crashed into negative terri-

tory for the first time on April 20. But

when industrial conglomerate Dover

Corp. held its earnings call the next

day, executives barely touched on the

subject. That’s because Dover—a $13 bil-

lion company that makes gas station

pumps,barcodeprinters,andrefrigerateddisplaysfor

grocerystores,amongotherthings—spunoffitsApergy

Corp.energybusinessinMay2018.

It’sa caseofspectacularlygood,if somewhatacciden-

tal,timing. Former Dover Chief Executive Officer Bob

Livingston had actually expressed concern in 2017 about

divesting the energy assets too early, lest he deprive share-

holdersofthebenefitsofa recoveryfromtheoilpricerout

in 2015 and2016.Butwithsomeencouragementfromactiv-

istinvestor Third Point LLC, he moved ahead anyway, mak-

ing this a success story for the push to streamline industrial

conglomerates and steer them away from more volatile

businesses. Since the split, shares of Dover are up about

20%, more than triple the gains of the S&P 500 index, while

thoseofApergyaredownabout80%.

Doverisn’timmunetothepandemic.Shutteredrestau-

rantsareunlikelytospringforitsfood-service equipment

anytime soon, and fashion retailers are going to spend less

◼ LAST THING

With Bloomberg Opinion

By Brooke Sutherland

Good Riddance

To Energy Assets

onitsdigital-textile-printingproducts.

And Dover does still sell pumps to the

energy sector. With all the uncertainty,

it withdrew its earnings guidance for

the year. But the company is clearly in

a much better position than it would

have been without the breakup, says

Melius Research  LLC analyst Scott

Davis. Earnings per share declined

more than 30% from peak to trough

during the last oil price slump. In con-

trast, while analysts have been aggres-

sively cutting their earnings estimates

for Dover, they’re modeling a decline on average of only

about 7% in 2020.

This kind of resilience in the face of market swings is

preciselywhyindustrialconglomerateshavespentmuch

ofthepastfiveyearsspinningoffandsellingassets.Some

companies have moved more slowly: Emerson Electric

Co. still has outsize exposure to the energy sector and

a weird amalgamation of businesses ranging from auto-

mation equipment to garbage disposals. Eaton Corp. has

yet to divest its volatile vehicle unit despite analysts’ calls

forit todoso.GeneralElectricCo.isstuckwitha 37%

stakeinoilfield-servicescompanyBakerHughesCo.that’s

droppedsharplyinvalue.

Dover’sabilitytoweatherthecrisiswillsenda message

tothosestillsittingonvolatilebusinesses,energy-related

andotherwise:It’sbettertogetoutwhileyoucan.<BW>

�Sutherlandisa columnistcoveringdealsandindustrial

companies for Bloomberg Opinion