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Donaldson Company, Inc. (DCI - Free Report) reported third-quarter fiscal 2024 (ended Apr 30, 2024) adjusted earnings of 92 cents per share, which surpassed the Zacks Consensus Estimate of 84 cents. The bottom line increased 21.7% year over year.
Revenue Results
In the fiscal third quarter, total revenues of $927.9 million outperformed the Zacks Consensus Estimate of $920 million. The top line increased 6% year over year (up 6.8% at constant currency) in the reported quarter, driven by volume growth and benefits of pricing actions.
Region-wise, DCI’s net sales in the United States/Canada increased 10.5% year over year. The metric improved 2.2% and 20.9% year over year in Europe, the Middle East and Africa, and Latin America, respectively. However, net sales in the Asia Pacific declined 6.3%.
Donaldson reports revenues under three segments, namely Mobile Solutions, Industrial Solutions and Life Sciences.
A brief snapshot of segmental sales is provided below.
The Mobile Solutions segment’s (accounting for 63.1% of net sales) sales were $585.2 million, reflecting a year-over-year rise of 5.5%. Results were benefited from a10.9% improvement in aftermarket sales. However, sales fell 9.8% in Off-Road and 6% in On-Road businesses during the quarter.
Revenues generated from the Industrial Solutions segment (29%) were $269.1 million, up 2.9% year over year. Results benefited from sales growth of 2.4% in Industrial Filtration Solutions, and 5.9% in Aerospace and Defense.
Revenues generated from Life Sciences (7.9%) were $73.6 million, up 24.2% year over year.
Donaldson Company, Inc. Price, Consensus and EPS Surprise
In the fiscal third quarter, Donaldson’s cost of sales inched up 1.9% year over year to $597.8 million. Gross profit jumped 14.3% to $330.1 million. The gross margin increased 260 basis points (bps) to 35.6% on the back of higher sales, pricing benefits and deflation in input costs.
Operating expenses rose 13.2% year over year to $186.5 million. Operating profit in the quarter under review increased 15.8% to $143.6 million. The operating margin was 15.5%, up 130 bps year over year.
The effective tax rate in the quarter was 21.2% compared with 22.9% in the year-ago quarter.
Balance Sheet & Cash Flow
Exiting third-quarter fiscal 2024, Donaldson’s cash and cash equivalents were $223.7 million compared with $187.1 million in the fourth quarter of fiscal 2023. Long-term debt was $481.8 million compared with $496.6 million in the fourth quarter of fiscal 2023.
In the first nine months of fiscal 2024, DCI generated net cash of $366.5 million from operating activities, reflecting an increase of 3.6% year over year. Capital expenditure (net) totaled $65.8 million compared with $92.8 million in the year-ago fiscal period. Free cash flow increased 15.2% to $300.7 million. In the same time frame, management repaid its long-term debt of $228.8 million.
DCI also used $114 million to repurchase stocks and $90.3 million to pay out dividends during the first nine months of fiscal 2024.
FY24 Outlook
For fiscal 2024 (ending July 2024), Donaldson expects adjusted earnings per share in the range of $3.33-$3.39 compared with $3.24-$3.32 mentioned earlier. Sales are anticipated to increase in the 4-6% band from fiscal 2023 reported level. Positive pricing is projected to have an accretive impact of 2%. Movement in foreign currencies is forecast to have a negligible impact on sales.
On a segmental basis, Mobile Solutions’ sales are suggested to improve in the range of 2-4% from fiscal 2023 level. Sales growth for Industrial Solutions is envisioned to jump in the range of 6-8% from the fiscal 2023 figure. The company forecasts its Life Sciences segment’s sales to increase in mid-teens range.
Interest expenses are predicted to be approximately $22 million, while other income is projected in the $15-$17 million range. The effective tax rate is anticipated to be between 23% and 24%.
Capital expenditure is expected to be between $95 million and $105 million. Free cash flow conversion is anticipated in the range of 95-105%. Share buybacks are suggesteded to account for 2% of the outstanding shares.
Zacks Rank & Other Stocks to Consider
Donaldson currently carries a Zacks Rank #2 (Buy).
Some other top-ranked companies from the same space are discussed below.
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Donaldson (DCI) Q3 Earnings & Revenues Beat Estimates, Rise Y/Y
Donaldson Company, Inc. (DCI - Free Report) reported third-quarter fiscal 2024 (ended Apr 30, 2024) adjusted earnings of 92 cents per share, which surpassed the Zacks Consensus Estimate of 84 cents. The bottom line increased 21.7% year over year.
Revenue Results
In the fiscal third quarter, total revenues of $927.9 million outperformed the Zacks Consensus Estimate of $920 million. The top line increased 6% year over year (up 6.8% at constant currency) in the reported quarter, driven by volume growth and benefits of pricing actions.
Region-wise, DCI’s net sales in the United States/Canada increased 10.5% year over year. The metric improved 2.2% and 20.9% year over year in Europe, the Middle East and Africa, and Latin America, respectively. However, net sales in the Asia Pacific declined 6.3%.
Donaldson reports revenues under three segments, namely Mobile Solutions, Industrial Solutions and Life Sciences.
A brief snapshot of segmental sales is provided below.
The Mobile Solutions segment’s (accounting for 63.1% of net sales) sales were $585.2 million, reflecting a year-over-year rise of 5.5%. Results were benefited from a10.9% improvement in aftermarket sales. However, sales fell 9.8% in Off-Road and 6% in On-Road businesses during the quarter.
Revenues generated from the Industrial Solutions segment (29%) were $269.1 million, up 2.9% year over year. Results benefited from sales growth of 2.4% in Industrial Filtration Solutions, and 5.9% in Aerospace and Defense.
Revenues generated from Life Sciences (7.9%) were $73.6 million, up 24.2% year over year.
Donaldson Company, Inc. Price, Consensus and EPS Surprise
Donaldson Company, Inc. price-consensus-eps-surprise-chart | Donaldson Company, Inc. Quote
Margin Profile
In the fiscal third quarter, Donaldson’s cost of sales inched up 1.9% year over year to $597.8 million. Gross profit jumped 14.3% to $330.1 million. The gross margin increased 260 basis points (bps) to 35.6% on the back of higher sales, pricing benefits and deflation in input costs.
Operating expenses rose 13.2% year over year to $186.5 million. Operating profit in the quarter under review increased 15.8% to $143.6 million. The operating margin was 15.5%, up 130 bps year over year.
The effective tax rate in the quarter was 21.2% compared with 22.9% in the year-ago quarter.
Balance Sheet & Cash Flow
Exiting third-quarter fiscal 2024, Donaldson’s cash and cash equivalents were $223.7 million compared with $187.1 million in the fourth quarter of fiscal 2023. Long-term debt was $481.8 million compared with $496.6 million in the fourth quarter of fiscal 2023.
In the first nine months of fiscal 2024, DCI generated net cash of $366.5 million from operating activities, reflecting an increase of 3.6% year over year. Capital expenditure (net) totaled $65.8 million compared with $92.8 million in the year-ago fiscal period. Free cash flow increased 15.2% to $300.7 million. In the same time frame, management repaid its long-term debt of $228.8 million.
DCI also used $114 million to repurchase stocks and $90.3 million to pay out dividends during the first nine months of fiscal 2024.
FY24 Outlook
For fiscal 2024 (ending July 2024), Donaldson expects adjusted earnings per share in the range of $3.33-$3.39 compared with $3.24-$3.32 mentioned earlier. Sales are anticipated to increase in the 4-6% band from fiscal 2023 reported level. Positive pricing is projected to have an accretive impact of 2%. Movement in foreign currencies is forecast to have a negligible impact on sales.
On a segmental basis, Mobile Solutions’ sales are suggested to improve in the range of 2-4% from fiscal 2023 level. Sales growth for Industrial Solutions is envisioned to jump in the range of 6-8% from the fiscal 2023 figure. The company forecasts its Life Sciences segment’s sales to increase in mid-teens range.
Interest expenses are predicted to be approximately $22 million, while other income is projected in the $15-$17 million range. The effective tax rate is anticipated to be between 23% and 24%.
Capital expenditure is expected to be between $95 million and $105 million. Free cash flow conversion is anticipated in the range of 95-105%. Share buybacks are suggesteded to account for 2% of the outstanding shares.
Zacks Rank & Other Stocks to Consider
Donaldson currently carries a Zacks Rank #2 (Buy).
Some other top-ranked companies from the same space are discussed below.
Tetra Tech, Inc. (TTEK - Free Report) presently has a Zacks Rank of 2. It delivered a trailing four-quarter average earnings surprise of 11.1%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
In the past 60 days, the Zacks Consensus Estimate for TTEK’s 2024 earnings has risen 2.1%.
Luxfer Holdings (LXFR - Free Report) currently carries a Zacks Rank #2. It has a trailing four-quarter average earnings surprise of 122.5%.
The Zacks Consensus Estimate for LXFR’s 2024 earnings has increased 13.5% in the past 60 days.
Crane Company (CR - Free Report) presently has a Zacks Rank of 2. It delivered a trailing four-quarter average earnings surprise of 15.2%.
In the past 60 days, the Zacks Consensus Estimate for CR’s 2024 earnings has risen 4%.