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]

Financial Data and Key Metrics Changes - Total sales for the quarter were $870 million, a decrease of 1% year over year, impacted by a 170 basis point negative effect from currency translation. Excluding currency effects, sales increased by 1% with a pricing benefit of approximately 1% [14][24][140] - Adjusted EPS for the quarter was $0.83, reflecting a 3% increase compared to the prior year. Operating margin expanded year over year due to disciplined expense management [15][24][141] - Gross margin remained flat at 35.2% compared to the previous year, while operating margin increased by 40 basis points to 15.2% [24][151] Business Line Data and Key Metrics Changes - In mobile solutions, total sales were $548 million, down 1% year over year. Aftermarket sales increased by 4% year over year, driven by low double-digit growth in the OE channel [18][143] - Industrial solutions sales decreased by 4% to $254 million, with industrial filtration solutions (IFS) sales down 8% to $208 million due to slower capital expenditures. Aerospace and defense sales grew by 19%, partially offsetting IFS weakness [21][146] - Life sciences sales grew by 9% to $69 million, supported by ongoing strength in disk drive [21][147] Market Data and Key Metrics Changes - Mobile solutions in China saw a 1% increase in sales, with aftermarket sales offsetting first fit softness. However, macroeconomic weakness persists in the region [19][145] - The aerospace and defense sector is experiencing record levels of demand for new equipment, contributing positively to the industrial solutions segment [11][137] Company Strategy and Development Direction - The company is focused on maintaining its leadership position in technology-led filtration and is committed to strategic investments in growth initiatives, including R&D and capacity expansion [16][47] - A partnership with Daimler Truck North America on hydrogen fuel cell technology positions the company at the forefront of innovation in alternative power solutions [10][136] - The company aims to leverage its robust free cash flow and strong balance sheet for targeted strategic investments, both organic and inorganic [42][143] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving record earnings for fiscal 2025 despite challenging end market conditions, particularly in agriculture and industrial sectors [22][148] - The updated fiscal 2025 outlook forecasts total sales to be flat to up 4%, reflecting a change from previous guidance due to currency headwinds and softer end markets [28][154] - Management noted that while they are managing expenses tightly, they are also investing for future growth, indicating a balanced approach to current challenges and long-term strategy [16][41] Other Important Information - The company has maintained strong on-time delivery rates and continues to focus on customer service despite supply chain challenges [15][141] - Capital expenditures are projected between $85 million and $100 million, primarily for growth initiatives [40][41] - The company has a robust M&A pipeline focused on life sciences and industrial services [47] Q&A Session Summary Question: Insights on recent win in China and its implications - Management highlighted a recent technology win in the liquid sector for tractors, indicating a structural shift in the market that could benefit the company going forward [51][52] Question: Profitability split within life sciences segment - Management explained that traditional businesses are profitable, while acquisitions are pre-revenue, impacting overall segment profitability. Future product launches are expected to enhance profitability [54][56] Question: Divergence between OE and independent channels in aftermarket - Management noted a shift in behavior, with OE channels focusing more on parts-based businesses, while independent channels showed a cautious tone [60][62] Question: Visibility on IFS projects and guidance adjustments - Management indicated that project-based businesses, particularly in power generation, are subject to timing shifts, affecting revenue guidance [66][75] Question: Strength in aerospace and defense - Management confirmed strength in both aerospace and defense sectors, with improved supply chain performance contributing to positive results [78][80] Question: Impact of tariffs on off-road sector - Management stated that there have been no pre-buys in the off-road sector due to tariff concerns, and customers are focused on reducing inventory [86][88] Question: Update on CapEx projects in life sciences - Management reported that large CapEx projects in life sciences have not been replaced, leading to a guarded outlook for the segment [100][112]

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]

Financial Performance - Donaldson reported quarterly earnings of $0.83 per share, missing the Zacks Consensus Estimate of $0.85 per share, but showing an increase from $0.81 per share a year ago, resulting in an earnings surprise of -2.35% [1] - The company posted revenues of $870 million for the quarter ended January 2025, missing the Zacks Consensus Estimate by 4.25%, and down from $876.7 million year-over-year [2] - Over the last four quarters, Donaldson has surpassed consensus EPS estimates three times and topped consensus revenue estimates two times [2] Stock Performance and Outlook - Donaldson shares have increased by approximately 2.8% since the beginning of the year, outperforming the S&P 500's gain of 1.3% [3] - The company's earnings outlook, including current consensus earnings expectations for upcoming quarters, will be crucial for assessing future stock performance [4] - The current consensus EPS estimate for the coming quarter is $0.96 on revenues of $961.09 million, and for the current fiscal year, it is $3.64 on revenues of $3.74 billion [7] Industry Context - The Pollution Control industry, to which Donaldson belongs, is currently ranked in the bottom 40% of over 250 Zacks industries, indicating potential challenges for stock performance [8] - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can impact investor sentiment [5]

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]

Core Viewpoint - The company maintains a bullish stance on Donaldson Company, Inc. (NYSE: DCI) despite its returns trailing the S&P 500 in previous bullish commentaries [1]. Group 1: Investment Strategy - The investment strategy focuses on buying undervalued profitable stocks with strong balance sheets and minimal debt [1]. - The company also engages in writing calls against positions to generate additional income when opportunities arise [1]. - Risk management is implemented through position sizing and the use of trailing stop losses over time [1].

Core Viewpoint - Donaldson Company, Inc. (DCI) is highlighted as a stock to watch due to its upward earnings estimate revisions and solid performance metrics, making it an attractive option for investors [12][25]. Company Overview - Donaldson Company, Inc. is headquartered in Bloomington, MN, and specializes in manufacturing and selling filtration systems and replacement parts globally. The company was founded in 1915 [11]. Earnings Estimates - In the last 60 days, three analysts have revised their earnings estimates upwards for fiscal 2025, with the Zacks Consensus Estimate increasing by $0.01 to $3.64 per share. DCI has an average earnings surprise of 7.1% [12]. Zacks Rank and Style Scores - DCI currently holds a Zacks Rank of 3 (Hold) and has a VGM Score of A, indicating a solid position in the market [25]. - The company also boasts a Value Style Score of B, supported by attractive valuation metrics such as a forward P/E ratio of 18.68, which is appealing to value investors [20]. Investment Potential - With a strong Zacks Rank and top-tier Value and VGM Style Scores, DCI is recommended for investors looking for potential growth opportunities [26].

For Immediate ReleaseChicago, IL – December 12, 2024 – Today, Zacks Equity Research Donaldson Co., Inc. (DCI) , Tetra Tech, Inc. (TTEK) and Atmus Filtration Technologies Inc. (ATMU) .Industry: Pollution ControlLink: https://www.zacks.com/commentary/2381985/3-pollution-control-stocks-poised-to-gain-on-prospering-industry-trendsThe Zacks Pollution Control industry is well-poised to benefit from the healthy demand for air pollution abatement products, thanks to rising greenhouse gas emissions and growing aware ...