Core Insights - Donaldson Company, Inc. reported strong first-quarter fiscal 2026 results, with sales increasing by 3.9% year over year to $935.4 million, surpassing the consensus estimate of $922.9 million [1] - GAAP net earnings rose to $113.9 million (97 cents per share) from $99.0 million (81 cents per share) in the previous year, while adjusted EPS was 94 cents, exceeding the consensus of 92 cents [1] Financial Guidance - The company raised its fiscal 2026 guidance for adjusted EPS to a range of $3.95-$4.11, compared to the previous range of $3.92-$4.08, and above the consensus of $4.01 [2] - Sales growth guidance was revised to 1%-5% year over year, up from the earlier guidance of 1%-3%, with an expected pricing benefit of around one percentage point [2] Market Performance - CEO Tod Carpenter highlighted that the company gained market share in key businesses and increased replacement part sales, achieving a 13% growth in adjusted EPS from a 4% sales growth [3] - Following the earnings announcement, Donaldson shares dipped by 1.8%, trading at $92.16 [3] Analyst Ratings - Baird analyst Richard Eastman maintained an Outperform rating on Donaldson and raised the price target from $96 to $100 [6] - Stifel analyst Adam Farley maintained a Hold rating and increased the price target from $90 to $96 [6]

Core Insights - Donaldson Company, Inc. reported strong first-quarter fiscal 2026 results with sales increasing by 3.9% year over year to $935.4 million, surpassing the consensus estimate of $922.9 million, driven by favorable currency translation and volume growth [1] - GAAP net earnings rose to $113.9 million (97 cents per share) from $99.0 million (81 cents per share) in the previous year, with adjusted EPS of 94 cents exceeding the consensus of 92 cents [1] Fiscal Guidance - The company raised its fiscal 2026 guidance for adjusted EPS to a range of $3.95-$4.11, compared to the previous range of $3.92-$4.08, while the consensus was $4.01 [2] - Sales growth guidance was revised to 1%-5% year over year, up from the earlier guidance of 1%-3%, with a pricing benefit of approximately one percentage point [2] Market Performance - CEO Tod Carpenter highlighted that the company gained market share in key businesses and grew replacement part sales, achieving a 13% adjusted EPS growth from a 4% sales growth [3] - Following the earnings announcement, Donaldson shares dipped by 1.8% to trade at $92.16 [3] Analyst Ratings - Baird analyst Richard Eastman maintained an Outperform rating on Donaldson and raised the price target from $96 to $100 [6] - Stifel analyst Adam Farley maintained a Hold rating and increased the price target from $90 to $96 [6]

Core Insights - Donaldson Company, Inc. reported an earnings per share (EPS) of $0.94, exceeding the estimated $0.93, indicating strong financial performance [1][6] - The company achieved revenue of approximately $935.4 million in the first quarter of fiscal year 2026, surpassing the estimated $901.4 million, reflecting a 1.26% increase over the Zacks Consensus Estimate and a rise from $900.1 million in the same period last year [2][6] Financial Metrics - The company has a price-to-earnings (P/E) ratio of approximately 26.59, indicating a healthy market valuation of its earnings [3][6] - Donaldson's price-to-sales ratio stands at about 2.73, reflecting its market value relative to sales [3][6] - The enterprise value to sales ratio is around 2.85, showing total valuation compared to sales [4] - The enterprise value to operating cash flow ratio is approximately 22.53, suggesting a strong cash flow position [4] - The earnings yield is about 3.76%, indicating attractive earnings generated per dollar invested [4] Financial Health - The company maintains a debt-to-equity ratio of approximately 0.44, indicating a balanced approach to financing its assets [5] - A current ratio of around 2.15 suggests the company's ability to cover short-term liabilities with short-term assets, reflecting solid liquidity [5] - These financial metrics highlight Donaldson's strong financial health and its ability to sustain growth in the competitive filtration industry [5]

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Financial Performance - Net sales for the three months ended October 31, 2025, were $935.4 million, an increase of $35.3 million, or 3.9%, compared to $900.1 million for the same period in 2024[103] - Gross profit for the three months ended October 31, 2025, was $328.8 million, representing a gross margin of 35.2%, down from 35.5% in the prior year[103][108] - Net earnings for the three months ended October 31, 2025, were $113.9 million, an increase of $14.9 million, or 15.1%, compared to $99.0 million for the same period in 2024[115] Segment Performance - The Mobile Solutions segment reported net sales of $598.3 million for the three months ended October 31, 2025, an increase of $25.9 million, or 4.5%, from $572.4 million in 2024[120] - The Industrial Solutions segment achieved net sales of $257.8 million, slightly up from $257.6 million in the prior year[116] - The Life Sciences segment reported net sales of $79.3 million, an increase of $9.2 million, or 13.1%, compared to $70.1 million in 2024[116] - Aftermarket net sales increased by $29.1 million due to market share gains, while On-Road net sales decreased by $8.7 million due to a decline in global truck production[121] - Mobile Solutions segment earnings before income taxes for the three months ended October 31, 2025 were $111.3 million, or 18.6% of net sales, an increase from 18.3% in the same period of 2024[122] - Industrial Solutions segment net sales for the three months ended October 31, 2025 were $257.8 million, a slight increase of $0.2 million or 0.1% compared to $257.6 million in 2024[126] - Life Sciences segment net sales increased by $9.2 million, or 13.1%, reaching $79.3 million for the three months ended October 31, 2025, driven by strong sales in Food and Beverage and Disk Drive[131] Expenses and Taxation - Research and development expenses decreased to $19.2 million, or 2.1% of net sales, down from $22.7 million, or 2.5% of net sales, in the prior year[111] - Selling, general and administrative expenses were $169.6 million, or 18.1% of net sales, compared to $166.1 million, or 18.5% of net sales, in the previous year[109] - The effective tax rate for the three months ended October 31, 2025, was 22.8%, down from 24.2% in the same period of 2024[114] Cash Flow and Debt - Cash provided by operating activities for the three months ended October 31, 2025 was $125.4 million, an increase of $52.5 million from $72.9 million in 2024[135] - Cash used in investing activities decreased significantly to $3.4 million in the three months ended October 31, 2025, down from $96.0 million in 2024, primarily due to reduced equity investments[136] - Cash used in financing activities was $93.1 million for the three months ended October 31, 2025, a decrease of $102.9 million compared to cash provided of $9.8 million in 2024[137] - Total debt as of October 31, 2025 represented 31.0% of total capitalization, a slight decrease from 31.5% as of July 31, 2025[141] - Cash and cash equivalents increased to $210.7 million as of October 31, 2025, compared to $180.4 million as of July 31, 2025[139] Foreign Currency and Interest Rates - The estimated impact of foreign currency translation for the three months ended October 31, 2025 resulted in an increase in reported net sales of $11.9 million and an increase in reported net earnings of $1.7 million[152] - The total notional amount of foreign currency forward contracts designated as hedges was $55.5 million as of October 31, 2025, up from $35.7 million on July 31, 2025[154] - The total notional amount of foreign currency forward contracts not designated as hedges was $199.5 million as of October 31, 2025, compared to $189.6 million on July 31, 2025[154] - The total notional amount of net investment hedges was €80 million (approximately $88.8 million) as of October 31, 2025[155] - A 10% appreciation of the U.S. dollar compared to the Euro would result in a net gain of $8.7 million in the fair value of net investment hedges[156] - A hypothetical 0.5 percentage point increase in short-term interest rates would increase interest expense by approximately $0.5 million for the three months ended October 31, 2025[157] - The estimated fair values of fixed interest rate long-term debt were $252.5 million compared to carrying values of $275.0 million as of October 31, 2025[157] Commodity Price Exposure - The Company is exposed to fluctuating prices of commodity raw materials, which could result in lower gross profit if prices increase[159] - The Company strives to recover material cost increases through price adjustments to customers and cost reduction initiatives[159]

Financial Data and Key Metrics Changes - First quarter sales reached an all-time high of $935 million, a 4% year-over-year increase [5][12] - Operating profit margin expanded to a record 15.5%, up 60 basis points from the prior year [13][14] - Earnings per share (EPS) was $0.94, reflecting a 13% increase compared to the previous year [6][12] - The company returned $127 million to shareholders through share repurchases and dividends [6] Business Line Data and Key Metrics Changes - **Mobile Solutions**: Total sales were $598 million, up 5% year-over-year; aftermarket sales grew 7% [10] - **Industrial Solutions**: Total sales were $258 million, flat compared to the prior year; Industrial Filtration Solutions (IFS) sales grew 2% [11] - **Life Sciences**: Sales increased by 13% to $79 million, driven by strong growth in food and beverage and disk drive segments [11] Market Data and Key Metrics Changes - The power generation business is robust, supported by high electricity demand, particularly in data centers and AI infrastructure [7][8] - The company experienced solid growth in China, with overall sales up 15% [10] - Tariff impacts are estimated at $25 million annually, down from $35 million previously [9] Company Strategy and Development Direction - The company focuses on a balanced growth strategy and continues to invest in R&D and capital expenditures in high-growth areas [10][22] - The strategic capital allocation priorities include reinvestment in the company, disciplined M&A, dividends, and share repurchase [22][23] - The company aims to maintain its leadership position in technology-led filtration [22] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in delivering on financial and strategic objectives for the remainder of the year, increasing operating margin and EPS outlook [12][20] - The company anticipates record sales of $3.8 billion and operating margin expansion of 80 basis points to a record 16.5% [12][20] - Management noted that while there are cyclical headwinds, the overall demand remains strong, particularly in the power generation and aftermarket segments [7][8] Other Important Information - The company is on track to complete current footprint optimization initiatives by the second half of the fiscal year [9] - Cash conversion is projected to be in the range of 85%-95%, indicating improved working capital management [21] Q&A Session Summary Question: What was IFS' first-fit in aftermarket revenue in fiscal Q1? - Both first-fit and replacement were up, with power generation performing well due to ongoing projects [30] Question: Can you discuss pricing trends? - The company is in a normalized pricing cycle, managing costs well while remaining competitive [37] Question: What are the regional performance trends? - Europe is strengthening, while the U.S. and Latin America show more caution; China has seen growth but remains uncertain [39] Question: What are the primary drivers of decrementals in the industrial segment? - The decrementals were due to higher operating costs and timing issues in the Aerospace and Defense sector [50] Question: Can you elaborate on the disk drive business outlook? - The disk drive business is driven by technological evolution and demand from AI and cloud storage, with expectations for continued strength [56] Question: How does the company plan to grow in the power generation sector? - Growth is expected to be mid-single digits, with challenges related to capacity utilization and project timing [87]

Financial Data and Key Metrics Changes - First quarter sales reached an all-time high of $935 million, representing a 4% year-over-year increase [5] - Operating profit margin expanded to a record 15.5%, up 60 basis points from the prior year [12] - Earnings per share (EPS) was a record $0.94, reflecting a 13% increase compared to the previous year [5][12] - The company returned $127 million to shareholders through share repurchases and dividends [5] Business Line Data and Key Metrics Changes - **Mobile Solutions**: Total sales were $598 million, up 5% year-over-year; aftermarket sales grew 7% [9] - **Industrial Solutions**: Total sales were $258 million, flat compared to the prior year; Industrial Filtration Solutions (IFS) sales grew 2% [10] - **Life Sciences**: Sales increased by 13% to $79 million, driven by over 20% growth in food and beverage and disk drive segments [10] Market Data and Key Metrics Changes - The power generation business is robust, supported by high electricity demand, particularly in data centers and AI infrastructure [6] - The company experienced solid growth in the independent aftermarket channel, with sales growing nearly double digits [6] - The China business showed strength with overall sales up 15%, particularly in Off-Road and aftermarket segments [9] Company Strategy and Development Direction - The company focuses on a balanced growth strategy, leveraging its leadership in filtration technology and optimizing costs [4] - Continued investments in R&D and capital expenditures are aimed at growth areas such as solvent recovery and air filtration [9][22] - The company is committed to maintaining high on-time delivery rates and optimizing its supply chain to mitigate tariff impacts [8] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving record sales of $3.8 billion and EPS of $4.03 for fiscal 2026 [11] - The company anticipates gross margin expansion in the second half of the fiscal year as footprint optimization projects are completed [14] - Management noted that while there are cyclical headwinds, the overall demand remains strong, particularly in Europe and China [40] Other Important Information - The company expects to complete its current footprint optimization initiatives by the second half of the fiscal year [8] - The annualized estimate for the impact of tariffs has decreased to approximately $25 million, down from $35 million [8] Q&A Session Summary Question: What was IFS' first-fit in aftermarket revenue in fiscal Q1? - Both first-fit and replacement were up, with power generation performing well due to ongoing projects [30] Question: What structural benefits have been realized from footprint optimization? - Limited structural efficiencies have been realized to date, with more benefits expected in the latter part of the fiscal year [32] Question: Can you discuss pricing trends and market dynamics? - The company is in a normalized pricing cycle, managing costs well while maintaining competitive pricing [36] Question: How is the company performing in different regions? - Europe is strengthening, while the U.S. and Latin America show more caution; China has seen growth but remains uncertain [40] Question: What are the primary drivers of decrementals in the industrial segment? - Pressure on gross margin from higher operating costs and timing issues in project deliveries [51] Question: Can you elaborate on the disk drive business outlook? - The disk drive business is driven by technological evolution and demand from AI and cloud storage [57] Question: How does the company plan to grow in the power generation sector? - Growth is expected to be mid-single digits, with challenges related to capacity utilization and project timing [88]

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Financial Performance - First quarter sales increased by 4% year-over-year to $935 million[7] - Adjusted diluted EPS increased by 13% year-over-year to $0.94[7] - Adjusted operating margin increased by 60 bps year-over-year[7] - Adjusted free cash flow conversion was 101%[7] Segment Results - Mobile Solutions segment sales increased by 5% year-over-year to $598 million[12] - Life Sciences segment sales increased by 13% year-over-year to $79 million[20] - Industrial Solutions segment sales remained flat year-over-year at $258 million[16] Fiscal Year 2026 Guidance - Sales outlook projects growth of 1% to 5%[7] - Adjusted operating margin is expected to be between 16.2% and 16.8%[7] - Adjusted EPS guidance is within a range of $3.95 to $4.11[7] Balance Sheet and Cash Flow - The company returned $127 million to shareholders through dividends and share repurchases in the first quarter[7] - Net debt to adjusted EBITDA ratio is 0.7x[25]

Core Insights - Donaldson (DCI) reported quarterly earnings of $0.94 per share, exceeding the Zacks Consensus Estimate of $0.93 per share, and up from $0.83 per share a year ago, representing an earnings surprise of +1.08% [1] - The company achieved revenues of $935.4 million for the quarter ended October 2025, surpassing the Zacks Consensus Estimate by 1.26% and increasing from $900.1 million year-over-year [2] - Donaldson's stock has increased approximately 30.1% since the beginning of the year, outperforming the S&P 500's gain of 16.5% [3] Earnings Outlook - The company's earnings outlook is crucial for assessing future stock performance, including current consensus earnings expectations for upcoming quarters [4] - The current consensus EPS estimate for the next quarter is $0.91 on revenues of $901.28 million, and for the current fiscal year, it is $4.02 on revenues of $3.81 billion [7] Industry Context - The Pollution Control industry, to which Donaldson belongs, is currently ranked in the top 26% of over 250 Zacks industries, indicating a favorable outlook compared to the bottom 50% [8] - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked using tools like the Zacks Rank [5][6]