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Donaldson (DCI) Up 3.4% Since Last Earnings Report: Can It Continue?
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A month has gone by since the last earnings report for Donaldson (DCI - Free Report) . Shares have added about 3.4% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Donaldson due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Donaldson Q4 Earnings Top Estimates & Revenues Miss
Donaldson reported fourth-quarter fiscal 2024 (ended July 31, 2024) adjusted earnings of 94 cents per share, which surpassed the Zacks Consensus Estimate of 88 cents. The bottom line increased 20% year over year.
Revenue Results
Total revenues of $935.4 million missed the Zacks Consensus Estimate of $941 million. The top line increased 6.4% year over year (up 7.6% at constant currency), driven by volume growth and the benefits of pricing actions.
Region-wise, Donaldson’s net sales in the United States/Canada increased 11.5% year over year. The metric fell 2.8% year over year in Europe, the Middle East and Africa but increased 19.5% in Latin America. Also, net sales in the Asia Pacific improved 3.1%.
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 61.5% of net sales) sales were $575.3 million, indicating a year-over-year rise of 6.1%. Results benefited from a 12.6% improvement in aftermarket sales. However, sales fell 13% in Off-Road and 11.8% in On-Road businesses during the quarter.
Revenues generated from the Industrial Solutions segment (30.8%) were $287.8 million, up 3.9% year over year. Results benefited from sales growth of 39.7% in Aerospace and Defense businesses.
Revenues generated from the Life Sciences segment (7.7%) were $72.3 million, up 20.7% year over year. The results benefited from volume growth in Disk Drive and Food and Beverage businesses.
Donaldson’s Margin Profile
In the fiscal fourth quarter, Donaldson’s cost of sales increased 3.7% year over year to $600.6 million. Gross profit jumped 11.6% to $334.8 million. The gross margin increased 170 basis points (bps) to 35.8% on the back of higher sales and deflation in input costs.
Operating expenses rose 5% year over year to $188.6 million. Operating profit increased 21.4% to $146.2 million. The operating margin was 15.6%, up 190 bps year over year.
The effective tax rate was 21.3% compared with 21.7% in the year-ago quarter.
Balance Sheet & Cash Flow
Exiting the fiscal fourth quarter, Donaldson’s cash and cash equivalents were $232.7 million compared with $187.1 million in the fourth quarter of fiscal 2023. Long-term debt was $483.4 million compared with $496.6 million in the fourth quarter of fiscal 2023.
In fiscal 2024, the company generated net cash of $492.5 million from operating activities, indicating a decrease of 9.6% year over year. Capital expenditure (net) totaled $85.6 million compared with $118.5 million in the year-ago fiscal period. Free cash flow decreased 4.3% to $407.6 million. In the same time frame, management repaid its long-term debt of $228.8 million.
It also used $162.7 million to repurchase stocks and $122.8 million to pay out dividends during fiscal 2024.
Donaldson’s FY24 Outlook
For fiscal 2025 (ending July 2025), Donaldson expects adjusted earnings per share to be in the range of $3.56-$3.72 compared with $3.42 in fiscal 2024. Sales are anticipated to increase in the 2-6% band from the fiscal 2024 level. Positive pricing is projected to have an accretive impact of 1%.
On a segmental basis, Mobile Solutions’ sales are expected to be flat to increase 4% from the fiscal 2024 level. Industrial Solutions’ sales are envisioned to jump in the range of 4-8% from the fiscal 2024 figure. The company forecasts its Life Sciences segment’s sales to increase in the low-double-digit range.
Interest expenses are predicted to be approximately $21 million while other income is projected to be in the range of $16-$20 million. The effective tax rate is anticipated to be between 23% and 25%.
Capital expenditure is expected to be between $85 million and $105 million. Free cash flow conversion is anticipated to be in the range of 85-95%. Share buybacks are expected to account for 2-3% of the outstanding shares.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
VGM Scores
Currently, Donaldson has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Donaldson has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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Donaldson (DCI) Up 3.4% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Donaldson (DCI - Free Report) . Shares have added about 3.4% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Donaldson due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Donaldson Q4 Earnings Top Estimates & Revenues Miss
Donaldson reported fourth-quarter fiscal 2024 (ended July 31, 2024) adjusted earnings of 94 cents per share, which surpassed the Zacks Consensus Estimate of 88 cents. The bottom line increased 20% year over year.
Revenue Results
Total revenues of $935.4 million missed the Zacks Consensus Estimate of $941 million. The top line increased 6.4% year over year (up 7.6% at constant currency), driven by volume growth and the benefits of pricing actions.
Region-wise, Donaldson’s net sales in the United States/Canada increased 11.5% year over year. The metric fell 2.8% year over year in Europe, the Middle East and Africa but increased 19.5% in Latin America. Also, net sales in the Asia Pacific improved 3.1%.
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 61.5% of net sales) sales were $575.3 million, indicating a year-over-year rise of 6.1%. Results benefited from a 12.6% improvement in aftermarket sales. However, sales fell 13% in Off-Road and 11.8% in On-Road businesses during the quarter.
Revenues generated from the Industrial Solutions segment (30.8%) were $287.8 million, up 3.9% year over year. Results benefited from sales growth of 39.7% in Aerospace and Defense businesses.
Revenues generated from the Life Sciences segment (7.7%) were $72.3 million, up 20.7% year over year. The results benefited from volume growth in Disk Drive and Food and Beverage businesses.
Donaldson’s Margin Profile
In the fiscal fourth quarter, Donaldson’s cost of sales increased 3.7% year over year to $600.6 million. Gross profit jumped 11.6% to $334.8 million. The gross margin increased 170 basis points (bps) to 35.8% on the back of higher sales and deflation in input costs.
Operating expenses rose 5% year over year to $188.6 million. Operating profit increased 21.4% to $146.2 million. The operating margin was 15.6%, up 190 bps year over year.
The effective tax rate was 21.3% compared with 21.7% in the year-ago quarter.
Balance Sheet & Cash Flow
Exiting the fiscal fourth quarter, Donaldson’s cash and cash equivalents were $232.7 million compared with $187.1 million in the fourth quarter of fiscal 2023. Long-term debt was $483.4 million compared with $496.6 million in the fourth quarter of fiscal 2023.
In fiscal 2024, the company generated net cash of $492.5 million from operating activities, indicating a decrease of 9.6% year over year. Capital expenditure (net) totaled $85.6 million compared with $118.5 million in the year-ago fiscal period. Free cash flow decreased 4.3% to $407.6 million. In the same time frame, management repaid its long-term debt of $228.8 million.
It also used $162.7 million to repurchase stocks and $122.8 million to pay out dividends during fiscal 2024.
Donaldson’s FY24 Outlook
For fiscal 2025 (ending July 2025), Donaldson expects adjusted earnings per share to be in the range of $3.56-$3.72 compared with $3.42 in fiscal 2024. Sales are anticipated to increase in the 2-6% band from the fiscal 2024 level. Positive pricing is projected to have an accretive impact of 1%.
On a segmental basis, Mobile Solutions’ sales are expected to be flat to increase 4% from the fiscal 2024 level. Industrial Solutions’ sales are envisioned to jump in the range of 4-8% from the fiscal 2024 figure. The company forecasts its Life Sciences segment’s sales to increase in the low-double-digit range.
Interest expenses are predicted to be approximately $21 million while other income is projected to be in the range of $16-$20 million. The effective tax rate is anticipated to be between 23% and 25%.
Capital expenditure is expected to be between $85 million and $105 million. Free cash flow conversion is anticipated to be in the range of 85-95%. Share buybacks are expected to account for 2-3% of the outstanding shares.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
VGM Scores
Currently, Donaldson has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Donaldson has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.