Donaldson's Q3 Earnings Beat Estimates, Sales Increase Y/Y

Core Insights - Donaldson Company, Inc. (DCI) reported adjusted earnings of 99 cents per share for Q3 fiscal 2025, surpassing the Zacks Consensus Estimate of 95 cents, marking a year-over-year increase of 7.6% [1][8] - Total revenues reached $940.1 million, exceeding the Zacks Consensus Estimate of $939 million, with a year-over-year growth of 1.3% [2][8] Revenue Results - DCI's net sales in the United States/Canada rose by 0.9% year over year, while Europe, the Middle East, and Africa saw a decline of 0.6%. Latin America experienced a 2.3% increase, and the Asia Pacific region improved by 5.2% [2] - The Mobile Solutions segment, which accounts for 62% of net sales, reported sales of $582.6 million, down 0.4% year over year, with Off-Road and On-Road businesses declining by 8.3% and 24.5%, respectively. Aftermarket sales increased by 3.3% [3] - The Industrial Solutions segment generated revenues of $283.3 million, up 5.3% year over year, driven by a 27.1% increase in Aerospace and Defense sales [4] - The Life Sciences segment reported revenues of $74.2 million, a 0.7% increase year over year, benefiting from volume growth in the Disk Drive business [4] Margin Profile - DCI's cost of sales increased by 3.4% year over year to $618.2 million, leading to a gross profit decline of 2.5% to $321.9 million. The gross margin decreased by 140 basis points to 34.2% due to higher manufacturing costs [5] - Operating expenses rose by 25.7% year over year to $234.5 million, resulting in a 39.1% decrease in operating profit to $87.4 million, with an operating margin of 9.3%, down 620 basis points year over year [5] Balance Sheet & Cash Flow - As of the end of Q3 fiscal 2025, DCI's cash and cash equivalents were $178.5 million, down from $232.7 million in Q4 fiscal 2024. Long-term debt increased to $638.8 million from $483.4 million [7] - In the first nine months of fiscal 2025, DCI generated net cash of $251.0 million from operating activities, a decrease of 31.5% year over year. Free cash flow decreased by 36% to $192.4 million [8][9] FY25 Outlook - For fiscal 2025, DCI expects adjusted earnings per share to be in the range of $3.64-$3.70, compared to $3.42 in fiscal 2024, with sales anticipated to grow by 1-3% [10] - Segment-wise, Mobile Solutions sales are expected to be flat to increase by 2%, while Industrial Solutions sales are projected to rise by 2-4%. Life Sciences sales are expected to grow in the high single-digit range [11] - Capital expenditure is anticipated to be between $75 million and $90 million, with free cash flow conversion expected to be in the range of 80-90% [12]