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

Donaldson Company, Inc. DCI reported third-quarter fiscal 2025 (ended April 30, 2025) adjusted earnings of 99 cents per share, which beat the Zacks Consensus Estimate of 95 cents. The bottom line increased 7.6% year over year.

DCI’s Revenue Results

Total revenues of $940.1 million beat the Zacks Consensus Estimate of $939 million. The top line increased 1.3% year over year (up 1.6% at constant currency). (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)

Region-wise, Donaldson’s net sales in the United States/Canada increased 0.9% year over year. The metric decreased 0.6% year over year in Europe, the Middle East and Africa, and increased 2.3% in Latin America. Also, net sales in the Asia Pacific improved 5.2%.

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% of net sales) sales were $582.6 million, indicating a year-over-year decline of 0.4%. Sales fell 8.3% in Off-Road and 24.5% in On-Road businesses during the quarter. Aftermarket sales improved 3.3% year over year.

Revenues generated from the Industrial Solutions segment (30.1%) were $283.3 million, up 5.3% year over year. Industrial Filtration Solutions' sales increased 1.4% year over year. Sales growth of 27.1% in the Aerospace and Defense businesses also aided the results.

Revenues generated from the Life Sciences segment (7.9%) were $74.2 million, up 0.7% year over year. The results benefited from continued volume growth in the Disk Drive business.

Donaldson’s Margin Profile

In the fiscal third quarter, Donaldson’s cost of sales increased 3.4% year over year to $618.2 million. Gross profit declined 2.5% to $321.9 million. The gross margin of 34.2% declined 140 basis points, due to higher manufacturing costs.

Operating expenses rose 25.7% year over year to $234.5 million. Operating profit decreased 39.1% to $87.4 million. The operating margin was 9.3%, down 620 bps year over year.

The effective tax rate was 33.6% compared with 21.2% in the year-ago quarter.

Balance Sheet & Cash Flow of DCI

Exiting the fiscal third quarter, Donaldson’s cash and cash equivalents were $178.5 million compared with $232.7 million in the fourth quarter of fiscal 2024. Long-term debt was $638.8 million compared with $483.4 million in the fourth quarter of fiscal 2024.

In the first nine months of fiscal 2025, the company generated net cash of $251.0 million from operating activities, indicating a decrease of 31.5% year over year. Capital expenditure (net) totaled $58.6 million compared with $65.8 million in the year-ago fiscal period. Free cash flow decreased 36% to $192.4 million. In the same time frame, management repaid a long-term debt of $65 million.

It used $272.2 million to repurchase stocks and $96.9 million to pay out dividends during the first nine months of fiscal 2025.

Donaldson’s FY25 Outlook

For fiscal 2025 (ending July 2025), Donaldson expects adjusted earnings per share to be in the range of $3.64-$3.70 compared with $3.42 in fiscal 2024. Sales are anticipated to increase 1- 3% 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 2% from the fiscal 2024 level. Industrial Solutions’ sales are envisioned to jump in the range of 2-4% from the year-ago figure. The company forecasts its Life Sciences segment’s sales to increase in the high single-digit range.

Interest expenses are predicted to be approximately $23 million, while other income is projected to be in the range of $18-$20 million. The effective tax rate is anticipated to be between 23% and 24%.

Capital expenditure is expected to be between $75 million and $90 million. Free cash flow conversion is anticipated to be in the range of 80-90%.

DCI’s Zacks Rank

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.

Performance of Other Companies

AZZ Inc. AZZ came out with quarterly earnings of 98 cents per share in the second quarter of fiscal 2025 (ended February 2025), beating the Zacks Consensus Estimate of 95 cents. This compares with earnings of 93 cents per share a year ago.

AZZ reported revenues of $351.9 million, missing the consensus estimate by 3.8%. This compares with year-ago revenues of $366.5 million. 

Valmont Industries VMI reported revenues of $969.3 million in the first quarter of 2025, declining 0.9% on a year-over-year basis. Earnings per share of $4.32 remained flat year over year.

The reported revenues compare with the Zacks Consensus Estimate of $975.6 million. The company delivered an earnings surprise of 1.89%, with the consensus estimate being $4.24 per share.

Pentair plc PNR came out with quarterly earnings of $1.11 per share in the first quarter of 2025, beating the Zacks Consensus Estimate of $1.01. This compares with earnings of 94 cents per share a year ago.

Pentair reported revenues of $1.01 billion for the quarter, surpassing the consensus estimate by 2.7%. This compares with year-ago revenues of $1.02 billion.

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This article originally published on Zacks Investment Research (zacks.com).

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