Donaldson Company, Inc. (DCI) is benefiting from solid momentum across all its segments. The Mobile Solutions segment is gaining from higher volume in the aftermarket business, driven by positive market trends and the impact of expanded market share. The Industrial Solutions segment is riding on persistent strength in the aerospace and defense business. Robust momentum in commercial aerospace fueled by increased demand for new equipment, as well as solid demand in defense markets backed by the increased ord ...

Core Viewpoint - The Zacks Pollution Control industry is expected to grow due to increasing demand for air pollution control products driven by rising greenhouse gas emissions and health risks associated with pollution, alongside stringent regulations globally [1][2]. Industry Overview - The Zacks Pollution Control industry includes companies that provide innovative filtration systems, waste management solutions, energy recovery devices, and other products used across various sectors such as commercial, automotive, industrial, and healthcare [3]. - Companies in this industry are investing in innovative technologies, enhancing customer experiences, and modernizing supply chains [4]. Major Trends - **Strong Demand for Air Pollution Control**: Urbanization and greenhouse gas emissions from the industrial sector are driving demand for air quality control systems, with public awareness of health risks further fueling market growth [5]. - **Stringent Government Regulations**: Strict emission standards globally are expected to boost demand for pollution control equipment, particularly in Europe, which has some of the most rigorous laws [6]. - **Medical and Hazardous Waste Management**: The demand for medical and hazardous waste management services is increasing, supported by the use of AI and IoT in monitoring air pollution [7]. - **Oil Production and Geopolitical Factors**: Geopolitical instability is leading to increased oil production, which in turn is driving demand for pollution control equipment and services [8]. - **Emergence of Alternative Energy Sources**: The shift towards renewable energy sources is restraining demand for industrial emission-abatement products, influenced by supportive government policies and the rise of electric vehicles [9][10]. Industry Performance - The Zacks Pollution Control industry currently holds a Zacks Industry Rank of 89, placing it in the top 36% of over 250 Zacks industries, indicating solid near-term prospects [11][12]. - Over the past year, the industry has underperformed compared to the S&P 500 and the broader Industrial Products sector, declining by 3.8% while the S&P 500 increased by 19.8% [13]. Current Valuation - The industry is trading at a forward P/E ratio of 17.69X, below the S&P 500's 21.53X and the sector's 18.36X, indicating a relatively lower valuation compared to historical levels [14]. Leading Companies - **Energy Recovery, Inc. (ERII)**: Focused on energy efficiency technology solutions, particularly in water desalination, with strong earnings performance and a positive outlook [15][16]. - **Donaldson Company, Inc.**: Engaged in manufacturing filtration systems, benefiting from strong demand in the aftermarket and aerospace sectors [17][18]. - **Atmus Filtration Technologies Inc.**: A leader in industrial filtration, with effective pricing and a strong growth outlook, having gained 64.9% in the past year [19][20]. - **CECO Environmental Corp.**: Provides solutions in air quality and water treatment, with growth supported by strategic acquisitions and rising demand for industrial applications [21][22].

Financial Performance - Net sales for the three months ended January 31, 2025 were $870.0 million, a decrease of $6.7 million or 0.8% compared to $876.7 million for the same period in 2024[105]. - Net earnings for the three months ended January 31, 2025 were $95.9 million, a decrease of $2.8 million or 2.7% from $98.7 million in the same period of 2024[117]. - For the six months ended January 31, 2025, net sales were $1,770.1 million, an increase from $1,723.0 million in the same period of 2024[118]. - Net earnings for the six months ended January 31, 2025 were $194.9 million, an increase of $4.1 million, or 2.2%, compared to $190.8 million for the same period in 2024[128]. Segment Performance - The Mobile Solutions segment experienced a decline in sales of $2.8 million or 0.5%, while the Industrial Solutions segment saw a decrease of $9.7 million or 3.7%. In contrast, the Life Sciences segment grew by $5.8 million or 9.2%[109]. - Net sales for the Mobile Solutions segment for the six months ended January 31, 2025 were $1,119.9 million, an increase of $29.6 million, or 2.7%[134]. - Net sales for the Industrial Solutions segment for the six months ended January 31, 2025 were $511.3 million, an increase of $1.7 million, or 0.3%[144]. - Life Sciences segment net sales for the three months ended January 31, 2025 were $68.8 million, an increase of $5.8 million or 9.2% compared to $63.0 million for the same period in 2024[149]. - For the six months ended January 31, 2025, net sales for the Life Sciences segment were $138.9 million, an increase of $15.8 million or 12.8% compared to $123.1 million for the same period in 2024[153]. Expenses - Selling, general and administrative expenses increased to $159.2 million, or 18.3% of net sales, up from $156.8 million or 17.9% in the previous year[111]. - Research and development expenses were $21.2 million, or 2.4% of net sales, approximately flat compared to $22.1 million or 2.5% in the prior year[112]. - Selling, general and administrative expenses increased by $13.5 million, or 4.3%, to $325.3 million, representing 18.4% of net sales for the six months ended January 31, 2025[123]. - Research and development expenses were approximately flat at $43.9 million, or 2.5% of net sales, for the six months ended January 31, 2025[124]. Profitability Metrics - Gross profit for the three months ended January 31, 2025 was $305.9 million, maintaining a gross margin of 35.2%, consistent with the prior year[110]. - Gross margin as a percentage of net sales for the six months ended January 31, 2025 was 35.3%, slightly down from 35.4% for the same period in 2024[122]. - Earnings before income taxes for the Mobile Solutions segment for the six months ended January 31, 2025 were $200.2 million, or 17.9% of net sales, an increase from 17.6% for the same period in 2024[136]. - Earnings before income taxes for the Industrial Solutions segment for the six months ended January 31, 2025 were $81.9 million, or 16.0% of net sales, a decrease from 17.8% for the same period in 2024[146]. - Losses before income taxes for the Life Sciences segment for the three months ended January 31, 2025 were $0.5 million, representing 0.7% of net sales, a significant improvement from 9.2% of net sales in the same period of 2024[150]. - Losses before income taxes for the six months ended January 31, 2025 were $5.8 million, or 4.2% of net sales, down from 8.1% of net sales for the same period in 2024[154]. Taxation - The effective tax rate decreased to 23.2% for the three months ended January 31, 2025, compared to 23.5% for the same period in 2024[115]. - The effective tax rate decreased to 23.7% for the six months ended January 31, 2025, down from 24.2% for the same period in 2024, primarily due to an increase in discrete tax benefits[127]. Cash Flow and Debt - Cash provided by operating activities for the six months ended January 31, 2025 was $163.3 million, a decrease of $61.7 million from $225.0 million for the same period in 2024[157]. - Cash used in investing activities for the six months ended January 31, 2025 was $115.1 million, an increase of $70.6 million compared to $44.5 million for the same period in 2024[158]. - Cash used in financing activities for the six months ended January 31, 2025 was $88.5 million, a decrease of $83.2 million from $171.7 million for the same period in 2024[159]. - As of January 31, 2025, total debt represented 27.2% of total capitalization, up from 26.5% as of July 31, 2024[163]. - Long-term debt outstanding was $539.7 million as of January 31, 2025, an increase of $31.3 million from $508.4 million as of July 31, 2024[164]. Foreign Currency and Interest Rates - The estimated impact of foreign currency translation for the six months ended January 31, 2025 resulted in a decrease in reported net sales of $7.3 million and a decrease in reported net earnings of $0.6 million[174]. - As of January 31, 2025, the total notional amount of foreign currency forward contracts designated as hedges was $48.1 million, up from $32.3 million as of July 31, 2024[176]. - The total notional amount of foreign currency forward contracts not designated as hedges was $214.9 million as of January 31, 2025, down from $249.7 million as of July 31, 2024[176]. - A hypothetical 0.5 percentage point increase in short-term interest rates would increase interest expense by approximately $0.7 million for the six months ended January 31, 2025[179]. Commodity Prices - The Company is exposed to fluctuating prices of commodity raw materials, which could result in lower gross profit if prices increase[182]. - The Company aims to recover material cost increases through price adjustments to customers and cost reduction initiatives[182].

Core Insights - Donaldson Company, Inc. reported second-quarter fiscal 2025 adjusted earnings of 83 cents per share, missing the Zacks Consensus Estimate of 85 cents, but showing a year-over-year increase of 2.5% [1] - Total revenues for the quarter were $870.0 million, below the Zacks Consensus Estimate of $909 million, reflecting a year-over-year decrease of 0.8% [2] Revenue Results - Revenue breakdown by region showed a 3.8% increase in the United States/Canada, a 9.2% decrease in Europe, the Middle East, and Africa, a 1.7% increase in Latin America, and a 0.5% increase in Asia Pacific [2] - The Mobile Solutions segment accounted for 62.9% of net sales, generating $547.5 million, down 0.5% year over year, with significant declines in Off-Road (12.8%) and On-Road (24.4%) businesses, while aftermarket sales improved by 4% [3] - Industrial Solutions segment revenues were $253.7 million, down 3.7% year over year, with Industrial Filtration Solutions sales declining by 7.5%, although Aerospace and Defense businesses saw an 18.7% increase [4] - Life Sciences segment revenues increased by 9.2% year over year to $68.8 million, driven by volume growth in the Disk Drive business [4] Margin Profile - Cost of sales decreased by 0.7% year over year to $564.1 million, while gross profit declined by 0.9% to $305.9 million, maintaining a gross margin of 35.2% [5] - Operating expenses rose by 0.8% year over year to $180.4 million, leading to a 3.1% decrease in operating profit to $125.5 million, with an operating margin of 14.4% [5] - The effective tax rate was 23.2%, slightly down from 23.5% in the previous year [5] Balance Sheet & Cash Flow - Cash and cash equivalents at the end of the quarter were $189.1 million, down from $232.7 million in the previous quarter, while long-term debt increased to $514.7 million from $483.4 million [6] - In the first six months of fiscal 2025, net cash generated from operating activities was $163.3 million, a decrease of 27.4% year over year, with free cash flow down 33.9% to $119.4 million [7] - The company repurchased $81.4 million in stock and paid out $64.6 million in dividends during the first half of fiscal 2025 [8] FY25 Outlook - For fiscal 2025, adjusted earnings per share are expected to be in the range of $3.60-$3.68, compared to $3.42 in fiscal 2024, with sales anticipated to be flat to increase by 4% [9] - Segment-wise, Mobile Solutions sales are expected to decrease by 1% to increase by 3%, Industrial Solutions sales are projected to grow by 1-5%, and Life Sciences sales are expected to rise in the high single-digit range [10] - Interest expenses are estimated at approximately $21 million, with other income projected between $18-$20 million, and an effective tax rate anticipated between 23% and 25% [11]

Donaldson Company, Inc. (NYSE:DCI) Q2 2025 Earnings Call Transcript February 27, 2025 10:00 AM ET Company Participants Sarika Dhadwal - Investor Relations Tod Carpenter - Chairman, President and Chief Executive Officer Brad Pogalz - Chief Financial Officer Conference Call Participants Bryan Blair - Oppenheimer Rob Mason - Baird Brian Drab - William Blair Lawrence Alexander - Jefferies Stefan Diaz - Morgan Stanley Adam Farley - Stifel Christa Ladies and gentlemen, thank you for standing by. My name is Christ ...

Core Viewpoint - Donaldson (DCI) reported a slight decline in revenue for the quarter ended January 2025, with earnings per share (EPS) showing a modest increase compared to the previous year [1] Financial Performance - Revenue for the quarter was $870 million, down 0.8% year-over-year, and below the Zacks Consensus Estimate of $908.65 million, resulting in a surprise of -4.25% [1] - EPS was reported at $0.83, an increase from $0.81 in the same quarter last year, but below the consensus estimate of $0.85, leading to an EPS surprise of -2.35% [1] Segment Performance - Industrial Solutions segment reported net sales of $253.70 million, below the estimated $277.26 million, reflecting a year-over-year decline of -3.7% [4] - Mobile Solutions generated net sales of $547.50 million, slightly below the estimated $555.49 million, with a year-over-year change of -0.5% [4] - Life Sciences segment achieved net sales of $68.80 million, surpassing the estimated $71.47 million, marking a year-over-year increase of +9.2% [4] - Industrial Filtration Solutions within Industrial Solutions reported net sales of $207.50 million, below the estimate of $238.85 million, representing a year-over-year decline of -7.6% [4] - Aerospace and Defense within Industrial Solutions saw net sales of $46.20 million, exceeding the estimate of $38.90 million, with a year-over-year increase of +18.8% [4] - Off-Road Mobile Solutions reported net sales of $80.20 million, below the estimate of $92.06 million, reflecting a year-over-year decline of -12.7% [4] - On-Road Mobile Solutions had net sales of $25.30 million, below the estimate of $29.49 million, with a year-over-year decline of -24.5% [4] - Aftermarket Mobile Solutions reported net sales of $442 million, exceeding the estimate of $431.17 million, with a year-over-year increase of +4% [4] Earnings Before Income Taxes - Mobile Solutions reported earnings before income taxes of $95.50 million, above the estimate of $93.47 million [4] - Industrial Solutions reported earnings before income taxes of $40.90 million, below the estimate of $47.72 million [4] - Life Sciences reported a loss before income taxes of -$0.50 million, better than the estimated loss of -$1.22 million [4] - Corporate and unallocated reported a loss before income taxes of -$10.90 million, slightly worse than the estimate of -$10.67 million [4] Stock Performance - Donaldson's shares returned -1.5% over the past month, compared to the Zacks S&P 500 composite's -2.2% change, indicating relative stability [3] - The stock currently holds a Zacks Rank 3 (Hold), suggesting it may perform in line with the broader market in the near term [3]

Donaldson (DCI) came out with quarterly earnings of $0.83 per share, missing the Zacks Consensus Estimate of $0.85 per share. This compares to earnings of $0.81 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of -2.35%. A quarter ago, it was expected that this maker of filtration systems would post earnings of $0.82 per share when it actually produced earnings of $0.83, delivering a surprise of 1.22%.Over the last four quarters, ...

Financial Performance - Second quarter sales were $870.0 million, down 0.8% year over year, but up 0.9% in constant currency[1] - GAAP EPS for the second quarter was $0.79, a decrease of 2.2% compared to 2024, while adjusted EPS was $0.83, an increase of 2.5%[1] - Operating income margin decreased to 14.4%, down 40 basis points year over year, while adjusted operating margin increased to 15.2%[7][6] - Full-year adjusted EPS guidance is narrowed to between $3.60 and $3.68, with sales forecasted to be flat to up 4% compared to the prior year[9][10] - Net earnings for the six months ended January 31, 2025, were $194.9 million, up from $190.8 million in the same period of 2024, representing a growth of 1.6%[23] - The company reported net earnings of $95.9 million for the three months ended January 31, 2025, compared to $98.7 million in the same period last year[38] - Adjusted diluted EPS for the three months ended January 31, 2025, was $0.83, up from $0.81 in the prior year[39] - The adjusted EBITDA for the six months ended January 31, 2025, was $327.3 million, an increase from $311.9 million in the prior year[38] Segment Performance - The company generated sales growth in Aftermarket (up 4.0%), Aerospace and Defense (up 18.7%), and Life Sciences (up 9.2%) segments[3][5] - Mobile Solutions segment sales decreased 0.5%, with Off-Road and On-Road sales declining 12.8% and 24.4%, respectively[4] - Industrial Solutions segment sales decreased 3.7%, primarily due to volume declines, while Aerospace and Defense sales grew 18.7%[5] - The Mobile Solutions segment reported net sales of $870.0 million for the three months ended January 31, 2025, down 0.8% from $876.7 million in the same period of 2024[28] - The Industrial Solutions segment saw a 3.7% decrease in net sales to $253.7 million for the three months ended January 31, 2025, compared to $263.4 million in 2024[28] - Life Sciences segment net sales increased by 9.2% to $68.8 million for the three months ended January 31, 2025, compared to $63.0 million in 2024[28] - The Life Sciences segment showed a strong performance with a 12.8% increase in revenue for the six months ended January 31, 2025, driven by a 24.2% growth in the U.S./CA region[32] - The Aerospace and Defense sector within the Industrial Solutions segment experienced a significant revenue increase of 22.6% for the six months ended January 31, 2025[32] - The Aftermarket segment in Mobile Solutions saw a revenue increase of 7.3% for the six months ended January 31, 2025, with a 9.3% growth in the U.S./CA region[32] - The total revenue for the Industrial Solutions segment remained flat with a slight increase of 0.3% for the six months ended January 31, 2025[32] - The On-Road category in Mobile Solutions faced a decline of 19.5% for the six months ended January 31, 2025, particularly impacted in the U.S./CA region[32] Cash Flow and Investments - Capital expenditures are forecasted to be between $85 million and $100 million, with free cash flow conversion expected between 85% and 95%[13] - Free cash flow for the three months ended January 31, 2025, was reported at $71.5 million, compared to $65.8 million in the same period last year[38] - The cash conversion ratio improved to 74.4% for the three months ended January 31, 2025, compared to 66.7% in the same period of 2024[25] - The company anticipates repurchasing 2% to 3% of its outstanding shares during the fiscal year[13] Tax and Liabilities - The effective tax rate for the company was 23.2%, compared to 23.5% in the previous year[8] - The effective tax rate for the six months ended January 31, 2025, was 23.7%, down from 24.2% in the same period of 2024[25] - Total current liabilities decreased slightly to $765.8 million from $782.5 million, a reduction of 2.5%[21] Assets and Overall Growth - Total assets increased to $2,961.3 million as of January 31, 2025, compared to $2,914.3 million on July 31, 2024, reflecting a growth of 1.6%[21] - Total company revenue increased by 2.7% for the six months ended January 31, 2025, with a notable growth of 5.6% in the U.S./CA region[32]

Core Viewpoint - Wall Street analysts forecast that Donaldson (DCI) will report quarterly earnings of $0.85 per share, reflecting a year-over-year increase of 4.9%, with anticipated revenues of $908.65 million, showing a 3.6% increase compared to the previous year [1]. Earnings Projections - Over the last 30 days, there has been no revision in the consensus EPS estimate for the quarter, indicating that analysts have not changed their initial forecasts during this period [2]. - Changes in earnings projections are crucial for predicting investor reactions to the stock, as empirical studies show a strong correlation between earnings estimate trends and short-term stock price movements [3]. Key Metrics Estimates - Analysts estimate 'Net Sales- Industrial Solutions segment' at $277.26 million, indicating a year-over-year change of +5.3% [5]. - 'Net Sales- Mobile Solutions' is expected to reach $555.49 million, reflecting a change of +0.9% from the year-ago quarter [5]. - The 'Net Sales- Life Sciences segment' is projected to be $71.47 million, suggesting a year-over-year increase of +13.4% [5]. Segment-Specific Sales Estimates - 'Net Sales- Industrial Solutions- Industrial Filtration Solutions' is estimated at $238.85 million, indicating a +6.4% change from the prior-year quarter [6]. - 'Net Sales- Industrial Solutions- Aerospace and Defense' is projected to be $38.90 million, with no change from the year-ago quarter [6]. - 'Net Sales- Mobile Solutions- Off-Road' is expected to reach $92.06 million, reflecting a +0.2% change from the prior-year quarter [7]. - 'Net Sales- Mobile Solutions- On-Road' is estimated at $29.49 million, suggesting a -12% year-over-year change [7]. - 'Net Sales- Mobile Solutions- Aftermarket' is projected to be $431.17 million, indicating a +1.5% change year-over-year [8]. Earnings Before Income Taxes - The consensus estimate for 'Earnings / (loss) before income taxes- Mobile Solutions' is $93.47 million, down from $99.20 million reported in the same quarter last year [8]. - For 'Earnings / (loss) before income taxes- Industrial Solutions', the estimate stands at $47.72 million, slightly up from $47.40 million reported in the same quarter last year [9]. Stock Performance - Shares of Donaldson have shown a return of -4.8% over the past month, compared to a -0.5% change in the Zacks S&P 500 composite [9].

Core Insights - Zacks Premium offers tools to enhance investor confidence and market engagement through daily updates, research reports, and stock screens [1] - The Zacks Style Scores are designed to help investors select stocks with the highest potential to outperform the market within a 30-day timeframe [2] Zacks Style Scores Overview - Stocks are rated A, B, C, D, or F based on value, growth, and momentum characteristics, with higher scores indicating better chances of outperforming the market [3] - The Style Scores are categorized into four types: Value Score, Growth Score, Momentum Score, and VGM Score, each focusing on different investment strategies [3][4][5][6] Value Score - The Value Score identifies attractive and discounted stocks using financial ratios such as P/E, PEG, Price/Sales, and Price/Cash Flow [3] Growth Score - The Growth Score evaluates stocks based on projected and historical earnings, sales, and cash flow to identify sustainable growth opportunities [4] Momentum Score - The Momentum Score assesses stocks based on recent price changes and earnings estimate trends to identify favorable buying opportunities [5] VGM Score - The VGM Score combines all three Style Scores, providing a comprehensive indicator for investors who utilize multiple investment strategies [6] Zacks Rank Integration - The Zacks Rank uses earnings estimate revisions to simplify portfolio building, with 1 (Strong Buy) stocks achieving an average annual return of +25.41% since 1988, significantly outperforming the S&P 500 [7][8] - Investors are encouraged to select stocks with a Zacks Rank of 1 or 2 and Style Scores of A or B to maximize returns [9] Stock Highlight: Donaldson Company, Inc. (DCI) - Donaldson Company, Inc. is a filtration systems manufacturer with a Zacks Rank of 3 (Hold) and a VGM Score of A, indicating potential for momentum investors [11] - The company has seen a 6.5% increase in share price over the past four weeks, with three analysts revising earnings estimates upwards for fiscal 2025 [11][12] - The Zacks Consensus Estimate for DCI has risen by $0.01 to $3.64 per share, with an average earnings surprise of 7.1%, making it a noteworthy option for investors [12]