Donaldson's Q1 Earnings Surpass Estimates, Sales Rise Year Over Year

Core Insights - Donaldson Company, Inc. (DCI) reported adjusted earnings of 83 cents per share for Q1 fiscal 2025, exceeding the Zacks Consensus Estimate of 82 cents, marking a 10.7% year-over-year increase [1] - Total revenues reached $900.1 million, surpassing the Zacks Consensus Estimate of $891 million, with a year-over-year growth of 6.4% [3] Revenue Results - The revenue growth was driven by aftermarket strength from market share gains and customer destocking [3] - Region-wise, net sales increased by 7% in the United States/Canada, 5% in Europe, the Middle East, and Africa, 6% in Latin America, and 7% in the Asia Pacific [3] Segment Performance - Mobile Solutions segment (63.6% of net sales) generated $572.4 million, a 6% year-over-year increase, benefiting from a 10.7% rise in aftermarket sales, although Off-Road and On-Road sales fell by 5.9% and 15% respectively [5] - Industrial Solutions segment (28.6%) reported revenues of $257.6 million, up 4.6% year over year, driven by a 26.8% increase in Aerospace and Defense sales [6] - Life Sciences segment (7.8%) achieved revenues of $70.1 million, a 16.6% year-over-year increase, supported by volume growth in Disk Drive and Food and Beverage businesses [6] Margin Profile - Cost of sales increased by 6.4% year over year to $580.5 million, while gross profit rose by 6.2% to $319.6 million, resulting in a gross margin decrease of 10 basis points to 35.5% [7] - Operating expenses rose 7.1% to $188.8 million, with operating profit increasing 4.9% to $130.8 million, leading to an operating margin of 14.5%, up 20 basis points year over year [7] Balance Sheet & Cash Flow - Cash and cash equivalents at the end of Q1 were $221.2 million, down from $232.7 million in the previous quarter, while long-term debt increased to $538.6 million from $483.4 million [9] - Net cash generated from operating activities was $72.9 million, a decrease of 47.2% year over year, with free cash flow down 58.3% to $47.9 million [10] FY25 Outlook - For fiscal 2025, adjusted earnings per share are expected to be between $3.56 and $3.72, with sales anticipated to grow by 2-6% from fiscal 2024 levels [12] - Segment-wise, Mobile Solutions sales are expected to be flat to increase by 4%, Industrial Solutions by 4-8%, and Life Sciences in the low-double-digit range [13] - Capital expenditure is projected to be between $85 million and $105 million, with free cash flow conversion expected to be in the range of 85-95% [14]