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Donaldson Company, Inc. DCI reported second-quarter fiscal 2026 (ended Jan. 31, 2026) adjusted earnings of 83 cents per share, which missed the Zacks Consensus Estimate of 90 cents. The bottom line was flat on a year-over-year basis.
Total revenues of $896.3 million lagged the Zacks Consensus Estimate of $898 million. The top line increased 3% year over year.
Region-wise, Donaldson’s net sales in the United States/Canada decreased 4.7% year over year. The metric increased 16% year over year in Europe, the Middle East and Africa, and decreased 5.2% in Latin America. Also, net sales in the Asia Pacific improved 8.7%.
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 62.1% of net sales) sales were $556.6 million, indicating a year-over-year increase of 1.6%. Sales rose 7.8% in Off-Road and decreased 9.2% in On-Road businesses during the quarter. Aftermarket sales improved 1.1% year over year.
Revenues generated from the Industrial Solutions segment (29%) were $259.7 million, up 2.4% year over year. Industrial Filtration Solutions' sales increased 7.2% year over year. Sales decline of 19.4% in the Aerospace and Defense businesses affected the results.
Revenues generated from the Life Sciences segment (8.9%) were $80 million, up 16.2% year over year. The results benefited from an increase in new equipment and replacement part sales in the Food & Beverage and Disk Drive businesses.
Donaldson Company, Inc. price-consensus-eps-surprise-chart | Donaldson Company, Inc. Quote
In the fiscal second quarter, Donaldson’s cost of sales increased 5.7% year over year to $596.5 million. Gross profit decreased 2% to $299.8 million. The gross margin of 33.5% declined 170 basis points due to operating inefficiencies associated with production shifts and costs related to footprint optimization initiatives.
Operating expenses were up 0.5% year over year to $181.1 million. Operating profit decreased 5.6% to $118.7 million. The operating margin was 13.2%, down 120 bps year over year.
The effective tax rate was 20.7% compared with 23.2% in the year-ago quarter.
Exiting the fiscal second quarter, Donaldson’s cash and cash equivalents were $194.4 million compared with $180.4 million in the fourth quarter of fiscal 2025. Long-term debt was $674.3 million compared with $630.4 million in the fourth quarter of fiscal 2025.
In the first six months of fiscal 2026, the company generated net cash of $158.4 million from operating activities, indicating a decrease of 3% year over year. Capital expenditure (net) totaled $28.7 million compared with $43.9 million in the year-ago fiscal period. Free cash flow increased 8.6% to $129.7 million.
It used $108.6 million to repurchase stocks and $69.3 million to pay out dividends during the first six months of fiscal 2026.
For fiscal 2026 (ending July 2026), Donaldson expects adjusted earnings per share (EPS) to be in the range of $3.93-$4.01 compared with $3.68 in fiscal 2025. Sales are anticipated to increase 1- 5% from the fiscal 2025 level. Positive pricing is projected to have an accretive impact of 1%.
On a segmental basis, Mobile Solutions’ sales are expected to increase 2-6% from the fiscal 2025 level. Industrial Solutions’ sales are envisioned be in the range of (1)-3% from the year-ago figure. The company forecasts its Life Sciences segment’s sales to increase in the 5-9% range.
Interest expenses are predicted to be approximately $26 million, while other income is projected to be in the range of $17-$19 million. The effective tax rate is anticipated to be between 22% and 24%.
Capital expenditure is expected to be between $60 million and $75 million. Free cash flow conversion is anticipated to be in the range of 85-95%. Donaldson expects to repurchase 1.2% of its outstanding shares during the fiscal year.
The company currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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This article originally published on Zacks Investment Research (zacks.com).
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