DCI

On August 26, Donaldson Company (NYSE:DCI) reported the first $1 billion quarter in its history, an 8% jump that capped a record fiscal year with $3.9 billion in total sales. Adjusted earnings per share climbed 12% to $1.15, and operating margin hit an all-time high of 17.5%. The filtration maker also handed investors fiscal 2027 guidance pointing to another record year. But buried inside that outlook is a jump in interest costs and fresh dilution tied to the company's biggest acquisition ever. Donaldson's fourth quarter gross margin reached 36.7%, an all-time company high, driven by higher volume, favorable pricing, and product mix. That strength flowed straight to the bottom line, pushing operating margin up 110 basis points from a year earlier. Aftermarket sales, the recurring replacement-parts business that keeps customers coming back long after the original equipment sale, grew 9% to $512 million, with double-digit growth in the independent channel. Mobile Solutions, the company's largest segment, posted $635 million in sales, up 8% on volume growth and pricing benefits. China stood out even more, with sales up 27% as OE replacement part sales jumped nearly 40%. In Life Sciences, sales grew 10% to $90 million, supported by the shift toward Heat-Assisted Magnetic Recording technology, which increases how much filtration content Donaldson can sell into each hard drive. Management also pointed to power generation as a source of durability rather than a cyclical blip, noting backlogs are full through fiscal 2027 with visibility into 2028. On the capital side, Donaldson has paid down more than $100 million of the debt tied to its Facet acquisition, brought net debt to EBITDA down to 1.4 times, and restarted its share buyback program after pausing it post-acquisition. The company also extended a streak of 30 consecutive years of dividend increases and 70 straight years of paying one. Not every part of the business moved in the same direction. Organic sales in Aerospace and Defense fell 3% in the quarter, a result of supply chain constraints that management said are only incrementally improving. Industrial Filtration Solutions sales declined 2% as lower dust collection equipment volume outweighed gains from power generation projects. A production shift to Mexico created operational inefficiencies that cost the company 40 basis points of gross margin in the quarter, and management said full recovery isn't expected until the middle of fiscal 2027. Separately, a plant closure in California and the move of that production to Illinois is expected to take the first half of fiscal 2027 to resolve a resulting backlog in the aerospace segment. The acquisition of Facet, completed May 4, is also adding real costs alongside its benefits. The deal was $0.06 dilutive to earnings per share in the fourth quarter alone, and management expects roughly $0.12 of dilution across all of fiscal 2027 from amortization and interest expense. That interest bill is set to rise sharply, guided to $55 million to $60 million in fiscal 2027, up from $36 million in fiscal 2026, largely because of debt taken on for the deal. Input costs tied to the conflict in the Middle East also weighed on gross margin during the quarter. Hedge fund ownership of Donaldson rose from 27 funds in the prior quarter to 35 in the most recent one, a sign of building institutional interest. Short interest sits at just 3.06% of float, which points to little organized skepticism toward the stock right now. Shares trade at a forward price-to-earnings ratio of 21.23 as of August 28, a multiple that assumes the record guidance for fiscal 2027 actually plays out. The Question For Fiscal 2027 Donaldson closes fiscal 2026 with records across sales, margins, and earnings, and guidance pointing to another record year ahead. The bull case rests on aftermarket strength, China momentum, and a power generation backlog that management says stretches into 2028. The bear case centers on rising interest costs, aerospace supply chain strain, and a Mexico plant transition still working through its inefficiencies. For the growth story to hold, Facet needs to keep delivering the margin and aftermarket benefits management describes even as its financing costs weigh on per-share results. How cleanly the industrial segment's margin pressure eases in the second half of fiscal 2027 will say a lot about how solid this record year truly was. While we acknowledge the potential of DCI as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock. READ NEXT: 10 Best Future Stocks to Buy Under $10 and 12 Best Performing Semiconductor Stocks to Invest In. Disclosure: None. Follow Insider Monkey on Google News.

Donaldson Company stock has delivered a 56.2% gain over the past three years, yet both an intrinsic value estimate based on a Discounted Cash Flow (DCF) approach and market multiple checks currently point to the shares trading at a premium, with the intrinsic value estimate sitting about 14.6% below the recent market price of US$95.24. A 56.2% return over three years puts Donaldson Company among the stronger compounders in its peer group. This often invites closer scrutiny of how much future growth is already reflected in the share price. Recent earnings strength and expectations for higher future cash flows can support the current valuation. Any disappointment in those cash flow trends or integration risks around acquisitions may weigh on what investors are willing to pay. A value score of 2 out of 6 suggests Donaldson Company does not screen as a clear bargain on the broader set of valuation checks. For investors, the debate is whether Donaldson Company’s solid multi year share price performance and earnings outlook already leave limited room for upside at today’s valuation. Amplify your research beyond Donaldson Company by screening for other industrial stocks with strong fundamentals and resilient balance sheets using the curated solid balance sheet and fundamentals stocks screener (51 results). The Discounted Cash Flow (DCF) model here looks at Donaldson Company through the lens of its future free cash flows to equity. On this view, the latest twelve month free cash flow of about $377.5 million is projected to keep growing, which supports the use of a two stage cash flow profile rather than a turnaround or decline scenario. Those cash flow estimates translate into an intrinsic value of about $83 per share, compared with the recent share price of $95.24. That gap implies the stock screens as around 14.6% overvalued on this particular DCF setup. The recent 2026 earnings beat and the raised 2027 outlook help explain why investors may be comfortable paying a richer price than the model output. On this DCF view, Donaldson Company stock currently looks overvalued relative to its estimated cash flow based intrinsic value. Our Discounted Cash Flow (DCF) analysis suggests Donaldson Company may be overvalued by 14.6%. Discover 51 high quality undervalued stocks or create your own screener to find better value opportunities. Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Donaldson Company. P/E is a useful lens for Donaldson Company because earnings remain a key anchor for how investors value mature industrial businesses. On this measure, Donaldson Company trades on a P/E of about 25.2x. That sits slightly below the Machinery industry average of roughly 26.6x and below the peer group average of about 28.3x, so at first glance the stock does not look stretched relative to many industrial filtration peers. The tailored fair P/E ratio for Donaldson Company is closer to 22.0x based on its margins, growth profile, market size and risk inputs. That is meaningfully lower than the current 25.2x, which suggests the market is paying a premium to what this framework indicates for the earnings stream today. For investors, this points to a valuation that already incorporates a fair amount of confidence in the current earnings trajectory and integration of the Facet acquisition. Overall, Donaldson Company stock appears expensive on the P/E multiple compared with the fair ratio implied by its fundamentals. See what the numbers say about this price — find out in our valuation breakdown. Simply Wall St Narratives pick up where the valuation work above leaves off for Donaldson Company. They spell out what would need to be true about the company’s future growth, margins and earnings for the stock to be worth significantly more or less than today’s price. Each one presents fair value as a thesis about the business that you can revisit over time on Simply Wall St’s Community page. Community narratives on Donaldson Company land in very different places, so it helps to see the underlying stories side by side. Bull case: roughly fairly valued Read the full Bull Case to see why Donaldson Company could be undervalued Bear case: 21% overvalued Read the full Bear Case to see why Donaldson Company could be overvalued Do you think there's more to the story for Donaldson Company? Head over to our Community to see what others are saying! For Donaldson Company, both the Discounted Cash Flow (DCF) estimate and the tailored P/E work point to an overvalued stock rather than hidden value. The intrinsic value view sits below the current price, and the earnings multiple also embeds a clear premium to what the fundamentals framework suggests. With the broader set of checks still coming through as weak on value, the key question from here is whether cash flow and margin performance can keep matching the confidence already priced into Donaldson Company shares. This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Companies discussed in this article include DCI. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email [email protected]

Image source: The Motley Fool. Wednesday, Aug. 26, 2026 at 10 a.m. ET Senior Director, Investor Relations - Sarika Dhadwal President and Chief Executive Officer - Richard Lewis Chief Financial Officer - Bradley J. Pogalz Operator: Hello, everyone. Thank you for joining us, welcome to Donaldson Company Q4 26 Earnings Webcast. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press *1 to raise your hand. To withdraw your question, press *1 again. I will now hand the conference over to Sarika Dhadwal, Senior Director, Investor Relations. Please go ahead. Sarika Dhadwal: Good morning. Thank you for joining Donaldson's fourth quarter fiscal 26 earnings conference call. With me today are Richard Lewis, president and CEO, and Bradley J. Pogalz, chief financial officer. This morning, we will provide a summary of our fourth quarter performance and our outlook for fiscal 27. During today's call, we will discuss non GAAP or adjusted results. The fourth quarter 26 non GAAP results exclude pretax charges of $8.9 million including $4.2 million of restructuring and other and $4.7 million of business development charges. This compares to prior year pretax charges of $9.5 million of restructuring and other. A reconciliation of GAAP to non GAAP metrics is provided within the schedules attached to this morning's press release. A quick note on the facet acquisition. We acquired Facet on May 4, 2026. Therefore, beginning with fourth quarter results, we will report on our combined performance. For clarity and to help understand organic performance, Richard and Bradley will add detail on Facet's impact in their remarks where appropriate. Please keep in mind that any forward looking statements made during this call are subject to risks and uncertainties, which are described in our press release and SEC filings. With that, I will now turn the call over to Richard. Richard Lewis: Thanks, Sarika, and good morning, everyone. Fiscal 26 was another record year for Donaldson Company and I am proud of the way our global teams came together. Demonstrating agility and resilience and finishing strong. Led by our collective mission of advancing filtration for a cleaner world, we reached sales of $3.9 billion, an all time high and a 5% increase versus 2025. grew EPS 8% to a record $3.98, expanded operating margin to a record 16% and returned $250 million to shareholders through dividends and share repurchases. Our execution on our clear and balanced growth strategy is yielding higher levels of performance. In mobile, we are building on our strong first fit and aftermarket leadership positions. Leveraging our large install base gaining share with our OEM partners, and winning new customers. In industrial, we are scaling our platform increasing our aftermarket penetration, expanding in high growth, end markets such as power generation. In life sciences, we are applying our industry leading technologies to grow and gain share in attractive markets focused on high purity filtration. In support of our growth strategy, we completed the largest acquisition in company history, facet filtration, expanding our strategic position in durable end markets, including aerospace and defense, and power generation, and also strengthening our financial profile with facets high growth, high margins, and high percentage of aftermarket sales. We have made good progress on integration, including tech collaboration to expedite product development, and testing to support growth into newer facet target markets. Our teams have also been working towards achieving targeted synergies. Our progress in 2026, no doubt, drove the company forward. We executed strategically and financially. While demonstrating structural expense discipline and driving operating leverage. Throughout the year, we displayed our commitment to delivering for all our stakeholders. Including our customers, shareholders, and employees. We continually do this through our leadership position in filtration, which was built on decades of solving our customers' most difficult filtration problems. Our best in class technology, uniquely powerful because we focus on filtration capabilities and leverage these technologies across markets. Our ability to help customers meet evolving environmental and operational goals helping to protect equipment, processes, and people. And our clear and balanced growth strategy as described earlier. This is how we have and continue to win. Now I will review some fourth quarter highlights. Bradley will discuss the quarterly financials and fiscal 27 guidance in more detail. And then I will return for some closing remarks. In the fourth quarter, sales surpassed $1 billion for the first time in company growing 8% above prior year, driven by higher volume, including the facet acquisition and pricing benefits. Operating margin was 17.5%, up 110 basis points over prior year and 90 basis points sequential step up from third quarter. Due to gross margin expansion, including from improved operational efficiency. Adjusted earnings per share were up 15-12% above 2025. Now I will cover some highlights by segment. In mobile solutions, sales were $635 million, up 8% driven by strong volume growth and pricing. Aftermarket sales were $512 million, up 9% with increases in all regions and in both channels. Grew double digits in our independent channel where we continue to gain share through our product availability reliability, and consistency. We are realizing sales from the major North America fleet win we mentioned last quarter. And we are excited about further strengthening our dealer relationships and creating meaningful pull through opportunities for incremental sales. On the first fit side, off road sales were $95 million, flat to prior year with strength in construction offsetting muted performance in agriculture. On road sales of $29 million increased 9% as truck production began to ramp, particularly in The US and Europe. I am encouraged by the momentum we are beginning to see in our first fit businesses, in this quarter. Had several meaningful program wins across regions positioning us well for years to come. Another bright spot within mobile has been our business in China. Sales were up 27%, due to a nearly 40% increase in OE replacement part sales. We are winning new platforms, particularly within the off road, and our growing export market is driving demand, and we are seeing our razor to sell razor blades model at work and driving aftermarket sales strength. In industrial solutions, sales were $334 million, up 8% driven by the inclusion of facet sales, which added $30 million or 10 percentage points of growth. Aerospace and defense sales, which now include facet, were $76 million. A 61% increase versus 2025. Organic aerospace and defense sales declined 3% as overall supply chain constraints while incrementally improving in some areas persist. IFS sales of $257 million declined 2%. Lower dust collection, new equipment volumes compared against a strong quarter in prior year were partially offset by robust power generation new equipment. New equipment sales from our industrial project based businesses can be lumpy, which is why growing aftermarket penetration remains a key to our strategy. To that end, this quarter, IFS replacement parts sales grew in the low single digits and accounted for 51% of total IFS sales. In life sciences, sales of $90 million increased 10%, largely a result of double digit growth in disk drive, which has been supported by strong market conditions and increasing demand for newer technologies. Solid food and beverage sales also contributed to the increase. Bart of our success in food and beverage has been driven by our ability to serve and expanding range of high purity applications. Including in food and beverage, health care, pharmaceuticals, and data centers. Through our growth in these markets, we have seen increasingly commonality in the capabilities required to serve them. Including the underlying filtration technologies, including membrane platforms. Engineering, manufacturing, and regulatory. This same foundation extends to our microelectronics business. As such, beginning in the first quarter, we will operate our food and beverage, and microelectronics businesses together under a new name, process filtration. With this focused structure, we aim to drive scalable above market growth. In summary, I am pleased with our fiscal 26 results. I am particularly impressed by how the Donaldson team closed out the year. We begin fiscal 27 with robust order volumes, healthy backlogs, and focused execution. Our full year guidance, which Bradley will cover in more detail in a minute, reflects our plans to build an even stronger Donaldson for the future and continue our long history of shareholder value creation. To that end, for fiscal 27, at the midpoint of our guidance ranges, we are forecasting record sales of over $4.1 billion, a 7.5% increase over prior year, driven by growth in several key high margin businesses, operating margin expansion of 90 basis points to point 9% earnings per share of roughly $4.30 including approximately $0.12 of dilution from facet and free cash flow conversion of approximately 95% to 105% which is important as we maintain our commitment to return value to our shareholders. With that, I will now turn it over to Bradley who will provide more details on the fourth quarter financial and our outlook for fiscal 27. Bradley? Bradley J. Pogalz: Richard. Good morning, everyone. I want to start by recognizing the contributions from the Donaldson team over the past year. We delivered fourth quarter results ahead of expectations. Capping off a year filled with significant macro uncertainty. Including from tariffs and conflict in The Middle East. While also navigating a complicated execution environment particularly in the industrial segment. Throughout the year, our teams had a clear focus on serving our customers, and delivering results. So thank you to all of our employees for your hard work, and for positioning us to build on our success in fiscal 27. I will cover our financial outlook in a few minutes. But first, I will discuss our record fourth quarter results in more detail. Note that my comments exclude the impact from the nonrecurring charges Sarika referenced earlier. Fourth quarter total sales increased 8% over the prior year. And adjusted EPS of $1.15 grew 12% due to operating margin expansion. I want to quickly touch on the contribution to these metrics from facet which added approximately 3 percentage points of sales growth and diluted our EPS by $0.06 in the quarter. Importantly, Facets business results were in line with forecast, meaning strong sales, gross margin, and operating profit. While amortization and interest were a bit higher than previously expected. Fourth quarter consolidated operating margin was 17.5%, an all time high. And up 110 basis points from the prior year. The sequential increase from third quarter of 90 basis points is important as it was driven by gross margin expansion. Highlighting delivery on our promise of continued improvement in operating particularly in our industrial business. To that end, gross margin increased 190 basis points to 36.7% an all time company high. Reflecting favorability from volume, pricing, and mix. I also want to call out a couple of offsetting factors. Specifically, select input cost inflation, largely related to the conflict in The Middle East, as well as continued operational inefficiencies in power generation. Within power generation, demand remains strong, and we are still stabilizing operations at our plant in Mexico following a shift in production. Consequently, we realized about 40 basis points of gross margin pressure in the quarter. I am encouraged by the progress made. Including measurable improvements in throughput delivery performance, and execution. Given the current trajectory, we remain confident that we will fully recover by the middle of fiscal 27. Important to note is that the impact from footprint optimization was immaterial in the quarter, as we continue to ramp productivity in the receiving facilities and we are still on track to deliver annualized savings of about $10 million once we hit run rate productivity in the second half of fiscal 27. Now back to the p and l. Fourth quarter operating expense as a rate of sales was 19.1%, 80 basis points above the prior year. The higher rate was driven primarily by the addition of facet run rate expenses and amortization. And we also had higher incentive compensation that was partially offset by continued structural expense discipline. Moving to segment profitability, Mobile solutions pretax margin was a record 21.3%. Above internal expectations and 220 basis points above prior year. Due to volume leverage, pricing, and mix related to aftermarket sales strength. Industrial solutions pretax margin was 16.4%, 450 basis points below prior year. Pressured by the inclusion of facet run rate expenses and amortization, organic expense deleveraging, and headwinds associated with power generation production shifts. On a sequential basis, industrial margin trended higher as expected improving 300 basis points from the third quarter. We continue to expect margins to return to more normalized levels in the second half of fiscal 27, as a result of sales leverage, margin recovery and power generation, and ramped up production following our plant closures in fiscal 26. Life sciences pretax margin was 11.9%, above internal expectations and up 660 basis points from prior year. Volume leverage from our higher margin food and beverage and Disk Drive businesses, combined with continued expense discipline, drove the notable improvement. In summary, we have strong momentum in our base business. And we will also have the incremental benefit of facet, giving us confidence we can generate another year of record performance in fiscal 27. With that, I will now go into the details of our outlook. Total sales are expected to grow between 5.5% and 9.5%, driven by increases in all 3 segments. Facet and pricing benefits are each expected to account for approximately 2 percentage points of growth. With currency adding about 1 percentage point and organic volume making up the balance. In mobile solutions, sales are expected to increase between 2-6% resulting from growth in both first fit and aftermarket. Off road sales are projected to increase mid single digits, with favorable conditions in construction while agriculture remains muted. On road sales are forecast to grow high single digits, as global truck production increases. Aftermarket sales are projected to increase mid single digits. As a result of continued share gains and higher vehicle utilization rates. In industrial solutions, total sales are forecast to grow mid teens with approximately half the growth coming from the inclusion of facet. IFS sales are expected to increase mid single digits with growth across all businesses. Including dust collection and power generation, where we continue to benefit from the super cycle and a robust order book through fiscal 27 and into fiscal 28. Aerospace and defense sales are projected to increase over 50% driven primarily by incremental facet sales. Organic aerospace and defense sales are forecast to increase mid teens as we work to resolve supply chain issues and deliver on our elevated backlogs. In life sciences, project sales to increase between 7-11% driven by continued customer demand for our process filtration and disk drive solutions. Moving down the p and l, we expect operating margin within a range of 16.6% to 17.2%. The mid point of our range implies a 90 basis points improvement from prior year. Driven by gross margin expansion as we benefit from pricing, facets higher structural gross margin, and improved operational efficiency. Operating expense as a rate of sales is forecast to partially offset gross margin favorability as a result of the full year impact of facet run rate expenses, as well as amortization of approximately $22 million. While the net impact of facet on our operating margin is expected to be immaterial this year, I do want to note that Facet is accretive in terms of gross margin and operating profit dollars. To help with modeling, I also want to highlight a few things. First, seasonality. We expect our sales and operating profit dollars to generally follow typical seasonality with the second half of the year accounting for the majority of both. As such, we are forecasting approximately 52% of the total sales and 57% of total operating profit in the second half. The second modeling item to highlight is interest expense. Fiscal 27 interest is expected to be between $55 and $60 million. Compared with $36 million in the prior year. Primarily as a result of interest on facet related debt. While we expect to pay down the facet debt over the course of the year, other factors in our interest expense plan result in a fairly even split across the quarters. All in, our EPS guidance for the full year is between $4.22 and $4.38. Including approximately $0.12 of dilution from facet when considering incremental amortization and additional interest expense. The midpoint of this range represents another all time high for Donaldson and an 8% increase from prior year. Now on to our balance sheet and cash flow outlook. Our balance sheet is in great shape. We have already paid down over $100 million of facet related debt. Our leverage ratio is currently about 1.4 times net debt to EBITDA. This gives us plenty of financial flexibility to allocate capital for the future. In terms of capital allocation, our priorities are unchanged. First, reinvest back into the company. Our r and d investments in strategically important high growth, high margin areas allow us to maintain and expand our place as a leader in technology led filtration. And our investments in working capital and capital expenditures ensure we are operating efficiently today and building for tomorrow. With that in mind, capital expenditures are expected to be between $70 million and $90 million. Balanced evenly between investments in new technologies and products across all segments, along with making ongoing investments in maintaining and improving the efficiency of our operational assets. With these investments, we project cash conversion in the range of 95% to 105%. Which marks a level higher than our historical averages largely driven by more targeted capital investments working capital management, and the completion of required annual tax payments stemming from The US Tax Cuts and Jobs Act of 2017. We Our second capital deployment priority is disciplined M&A. We are actively pursuing opportunities that strengthen our portfolio and meet our strategic and financial criteria. While we invest for profitable growth, we are also returning cash to shareholders. Our third capital allocation priority is dividends. We consistently pay and increase our quarterly dividend. Solidifying our place in the S and P high yield dividend aristocrat index. As of the end of calendar 25, we have paid dividends for 70 years in a row. 280 quarters. And we have increased the dividend for 30 years in a row. that is a statistic we are very proud of. And we look to continue that trend. Share repurchase is our fourth capital deployment priority and our variable lever. After pausing our repurchasing activity following the Fassett acquisition, we have now restarted our program and expect to purchase about 1% of shares outstanding this year. Which will offset stock compensation dilution. Before I turn it over to Richard, I wanna reiterate how pleased I am with the way we finished fiscal 26. And I look forward to carrying this momentum into fiscal 27. Now I will turn it over. Richard? Richard Lewis: Thanks, Bradley. Each day, Donaldson Company aims to grow and deliver customer value. Extending our leadership position in technology led filtration. We do this through innovative new solutions in every segment. Including armor seal technology in mobile, Mist Collector in industrial, and products such as our Lifetech high loading performance filter, and hammer related disc drive technology and liquid cooling capabilities in life sciences. With the acquisition of Fassett, we expanded the addressable markets which we can apply our capabilities to and our teams are already seeing cross selling opportunities to capitalize on. We are confident in our ability to grow and grow profitably. And we are doing so with great discipline, applying a rigorous approach to business portfolio management, ensuring each of our businesses has cleared the high bar to earn a place within Donaldson. I am also proud of how we are growing responsibly are on the path to achieve our 2030 sustainability ambitions, further reducing our greenhouse gas emissions, increasing our renewable energy usage, and advancing product solutions that help reduce environmental impacts. In our most recent sustainability report, we detail some of our latest technology led products. From hydraulic oil saving solutions in mobile to refillable semiconductor filtration systems and next generation battery venting and life sciences. And none of our success would be possible without our talented employees. And each day, we prioritize employee health and safety. Every Donaldson employee safely home, every day. In closing, as I look ahead, I am excited about the opportunities for Donaldson Company as we continue to build upon our success. Success. I will now turn the call back to the operator to open the line for questions. Operator: We will now begin the question and answer session. If you would like to ask a question, please press *1 to raise your hand. To withdraw a question, press *1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. The first question comes from the line of Angel Castillo with Morgan Stanley. Please go ahead. Brian Drab: Hi. Good morning. This is actually Brian Drab sitting in for Angel. Thanks for taking my question. Just starting with margin. Obviously, there is some seasonality here. In 4 q. The margins were a healthy, you know, 17.5%. As we look to, you know, fiscal 27, is there any underlying operational headwinds we should be aware of? Given the midpoint of the guide you know, closer to 17%. Thanks. Richard Lewis: Yeah. Good morning. Yeah. As we enter f 2027, and Bradley will run you through the numbers in a little bit more detail. This is Richard. From an operational perspective, we will start the year with some continued pressure in our industrial business We have talked about our power gen business and the first half pressure that comes from clearing out our facility in Mexico. So we will see a meaningful step up in that business in the second half. Also, we are finishing the closure of the plants that we had initiated last year. So there will be some volume improvements as the year goes on in that business. But I would say just in general, there is not a broad operational challenge. it is really a couple acute issues and then our normal seasonality that we will be looking at And then Brett can expound on that further. Bradley J. Pogalz: Yeah. I think the that normal seasonality is the important part, and we went through that a little bit in my remarks just to try to be clear for everybody. Given that there is a back half profit tilt, about 57% of operating profit landing in the second half. But I would echo Richard's comments. it is really about execution in the industrial business as we go ahead. Otherwise, I think we are looking very positively at margin for the year. The 1 nuance I would say is again, back to our comments, we talked about gross margin expansion with a little bit of operating expense headwind as a function of facets something to keep in mind. The amortization, just really wanna put a fine point on it. 22 million incremental amortization as a function of that transaction that should be modeled through. And that will that will obviously cascade through the year. And then we get to fourth quarter of fiscal 27 where we compare against a normal quarter with facet. Given that it is, we acquired at the beginning of this last quarter. Brian Drab: Okay. Perfect. that is, really helpful. Thanks for the color. And then on facet, so there was a it was $0.06 dilutive here in Q4, and yet the fiscal 27 guidance only assumes about $0.12 for the full year. Or, you know, like, below that annualized rate. So, you know, what are the main drivers for this? Is it debt pay down, cost synergies? Purchase accounting step down? Thank you. Bradley J. Pogalz: Yep. it is it is you have touched on 2 of the big ones. The purchase accounting step down and then pay down. So the amortization in the quarter was in the fourth quarter was more substantial than an annualized rate of $22 million. And that is that is a big part of it, and then some debt pay down. So the thing that I wanna underscore with Facet is on a cash basis. So I am talking business performance, less interest expense. In fiscal 27, facet is accretive. And I think that is an important point to note. Brian Drab: Great. Thank you. I will send it over. Operator: Thank you. The next question comes from the line of Robert Mason with Baird. You may go ahead. Quinn Peterson: Hey. Good morning. Thanks for taking the questions. First 1, Richard, just on the mid teens organic growth guidance in Aerospace and Defense. Can you unpack what gives you confidence the supply chain issues will be resolved to enable that level of growth? And what is the timing we should be thinking about as to when those supply constraints are resolved? Richard Lewis: Yeah. Good morning, Rob. When we look at the a and d business, our teams have been managing that situation very closely now for several months. And so we feel like we understand the issues intimately. The biggest challenge we have, frankly, going forward is the closure of our California facility that we moved into a facility in Illinois The good news is all of the closure cost associated with that for the most part are behind us, and so now it is really just ramping production in the new site We have teams deployed to support them. They have got a good handle on the set of issues, and we see sort of I call, operational data every week that shows their improvements. So if you think about it from a timing standpoint, it will take them the first half of the year to sort of chew through that late position. And return this to normalcy When we think about our full year expectations for a and d, that is a big part of what we are expecting. The broader supply chain issues with our supply base those are sort of transient acute issues. We feel like those are mostly under control. And we have folks managing proactively to monitor for new issues and try to head those off before they become significant headwinds. So all in all, it is a challenge, but we feel really good about our ability to sort of work through that through the fiscal year. Quinn Peterson: Thanks. And then within mobile, the first fit, both often on road, it seems like the guidance would imply no revenue dollar acceleration from the back half of this last year. Just is that conservatism? Maybe you could discuss your expectations for how an ag recovery might play out as well, that would be helpful. Richard Lewis: Yeah. So if we keep it to the first fit side in mobile, I will just kinda walk you through all of the end markets. We are seeing pretty broad based strength in mining and construction. And we saw that acceleration Really coming out of the holiday period last fiscal year through Q3 and Q4. That continues into next fiscal year, fiscal year 27. And it is pretty broad based. We see it across all the regions. And we see it really throughout the vast majority of our customer base. The trucking recovery is materializing as expected. We have seen sharp upturns in truck build rates specifically in The US. Our expectation is that a carry through the rest of the calendar year and likely into the first part of next calendar year. I think there is probably some uncertainty as we get into the second half. Of next calendar year and where this is gonna go, but all signs are pointing to a nice recovery there at least for now. And as you mentioned on ag, what we had been seeing previously was really pretty isolated green shoots. We are starting to see a little bit more broad improvement in that market, albeit at a lower scale than the other markets. And I would say the range of outcomes across the product segments the customer base is a little bit wider. But it is it we are starting to see green shoots there in ag and hopefully, that will continue to improve throughout the year. Quinn Peterson: Thank you very much. Operator: The next question comes from the line of Laurence Alexander with Jefferies. Please go ahead. Laurence Alexander: Can you give a bit more detail about the underlying trends in the life sciences outlook and how that is setting you up for 2028-2029. I mean, should we think about this as a steady cadence, or are there opportunities to shift your market share position over the next, say, 3-4 years? And then secondly, can you talk on PowerGen? Can you just remind us on the dynamics between first fit and replacement? If there is you know, given the expansion that we are seeing at the OEMs of capacity for gas turbines? Yeah. Richard Lewis: Good morning. Let's start with your life science question. Broadly, if you think about life sciences, the 2 largest businesses in that segment is our disk drive business and our process filtration business. We are seeing really strong demand outlook on both sides. If you think about the disk drive business, it is really a combination of share and pricing the technology shift to HAMR, which is the next generation technology that has significantly more content per drive for us. And then finally, it is it is really around continued volume growth. So it is really a recipe of all 3 of those. From what we see in our outlook, that has legs beyond fiscal year 27. We would see this as having a steady growth trajectory for a little while, and we are really optimistic about the technology that we are bringing to that market and our ability to continue to hold and take share The food and bev business process filtration's combination of microelectronics and our historic food and bev it is really a combination of new product releases, and our teams just really executing well commercially. The microelectronics business is seeing some pretty strong tailwinds. Due to the data center AI build out as well as what we are seeing in some of the liquid cooling inside that business. I would say the base business supporting pharma, food and bev continues to execute really well. So we have a lot of optimism around both of those businesses. And then on the power gen, and Brett can correct my numbers if I am off little bit here, but I think we are talking about 50 percent first fit, 50% aftermarket, roughly the first fit side clearly is going very, very strong. So we are expanding the install base pretty aggressively And we will we will continue to do that for quite some time. And then that is gonna turn into additional aftermarket revenue as those replacement part filters kick in a couple years. But overall, power gen, we are booked out. For the better part of the fiscal year, and we see line of sight to fully loading our capacity through 2028 Thank you. Operator: The next question comes from the line of Adam Farley with Stifel. Adam, your line is now open. Adam Farley: Good morning, everyone. Morning, Adam. Maybe start following up on that Life Sciences question. How should we think about margins in this business? Going forward? Or maybe another way of asking is what should we expect for incremental margins in this business? Richard Lewis: I think, Adam, if you think about the business and we split it into sort of our new acquisitions and then sort of our traditional business The traditional businesses are sort of leading margins for Donaldson, so think above company average. And ultimately, we would expect this entire business to be significantly above our company average from a margin profile. So over time, we will continue to work the acquisitions, and they all have really clear milestones on both products and commercial penetration. And I would say over the next 18 months, you can think about these products and some of those commercial milestones reaching some pretty significant milestones. So as those continue to mature, you can think about this business being a higher than company average margin business. Adam Farley: Okay. And then just shifting gears to IFS. Maybe a little bit more color on the dust collection business within that. How's the first fit piece of the business performing? How have orders trended through the quarter and into August? Are you seeing any increase from customers' willingness to deploy capital? I will leave it there. Thank you. Richard Lewis: Yeah. Adam, I and I would throw in maybe some of the other nonpower gen IFS businesses. Clearly, dust collection's the largest piece of that, but they are all trending in a pretty similar fashion. What we have seen and since we spoke last time is an acceleration of orders through our fourth quarter And I would say it is not to the same level we are seeing in some of our other end markets, but they are positive trends. And so the first half of last year, that business was Pretty muted on the demand front, and we saw it start to improve in Q3. We have seen an acceleration of that in Q4. So I would say non data center AI CapEx is improving. But certainly we are not at the peak and but we are encouraged. We are encouraged by the uptick, and a lot of the pressure had been in the US previously. And we are starting to see some of those, you know, quotes that we have been working on turn into order. So good signals going into f 2027. And we will continue to monitor that and be agile. As the year goes on. Bradley J. Pogalz: Adam, this is Bradley. I will just underscore 1 point. An important part about this business is roughly half goes through recurring revenue, and that is that is been hanging in okay. Not growth to the extent that we have seen in the mobile solutions, but it is important to note that we have got this durable side that supports us when CapEx is a little bit softer, like Richard was saying. Adam Farley: Thank you thank you for that. Thank you for taking my questions. Operator: There are no further questions at this time. I will now turn the call back to Richard Lewis for closing remarks. Richard Lewis: Lewis, I would like to thank all of our Donaldson employees around the world for their relentless commitment, our customers for their trust, and our shareholders for their continued support. Thank you for joining us today. We appreciate your interest in Donaldson and look forward to updating you on our progress next quarter. Thank you. Operator: This concludes today's call. Thank you for attending. You may now disconnect. Before you buy stock in Donaldson, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Donaldson wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years. 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As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool has positions in and recommends Donaldson. The Motley Fool has a disclosure policy. Donaldson (DCI) Q4 2026 Earnings Call Transcript was originally published by The Motley Fool

Donaldson (DCI) reported $1.06 billion in revenue for the quarter ended July 2026, representing a year-over-year increase of 8%. EPS of $1.15 for the same period compares to $1.03 a year ago. The reported revenue represents a surprise of +1.46% over the Zacks Consensus Estimate of $1.04 billion. With the consensus EPS estimate being $1.12, the EPS surprise was +2.68%. While investors closely watch year-over-year changes in headline numbers -- revenue and earnings -- and how they compare to Wall Street expectations to determine their next course of action, some key metrics always provide a better insight into a company's underlying performance. As these metrics influence top- and bottom-line performance, comparing them to the year-ago numbers and what analysts estimated helps investors project a stock's price performance more accurately. Here is how Donaldson performed in the just reported quarter in terms of the metrics most widely monitored and projected by Wall Street analysts: Net Sales- Industrial Solutions segment: $333.5 million compared to the $336.14 million average estimate based on three analysts. The reported number represents a change of +7.7% year over year. Net Sales- Life Sciences segment: $90.4 million compared to the $83.95 million average estimate based on three analysts. The reported number represents a change of +9.7% year over year. Net Sales- Mobile Solutions segment: $634.9 million compared to the $620.38 million average estimate based on three analysts. The reported number represents a change of +7.9% year over year. Net Sales- Mobile Solutions- On-Road: $28.6 million compared to the $32.27 million average estimate based on three analysts. The reported number represents a change of +8.8% year over year. Net Sales- Mobile Solutions- Off-Road: $94.7 million compared to the $95.43 million average estimate based on three analysts. The reported number represents a change of +0.1% year over year. Net Sales- Mobile Solutions- Aftermarket: $511.6 million versus the three-analyst average estimate of $492.65 million. The reported number represents a year-over-year change of +9.4%. Net Sales- Industrial Solutions- Industrial Filtration Solutions: $257.2 million versus the three-analyst average estimate of $264.51 million. The reported number represents a year-over-year change of -2%. Net Sales- Industrial Solutions- Aerospace and Defense: $76.3 million versus the two-analyst average estimate of $81.85 million. The reported number represents a year-over-year change of +61%. Earnings / (loss) before income taxes- Mobile Solutions: $135.5 million versus $128.96 million estimated by two analysts on average. Earnings / (loss) before income taxes- Life Sciences: $10.8 million compared to the $7.59 million average estimate based on two analysts. Earnings / (loss) before income taxes- Industrial Solutions: $54.7 million compared to the $57.95 million average estimate based on two analysts. View all Key Company Metrics for Donaldson here>>> Shares of Donaldson have returned -2.2% over the past month versus the Zacks S&P 500 composite's no change. The stock currently has a Zacks Rank #3 (Hold), indicating that it could perform in line with the broader market in the near term. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Donaldson Company, Inc. (DCI) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Our analysts just identified a stock with the potential to be the next Nvidia. Tell us how you invest and we'll show you why it's our #1 pick. Tap here. Achieved record fiscal 2026 sales of $3.9 billion, driven by a balanced growth strategy across Mobile, Industrial, and Life Sciences segments. Completed the acquisition of Facet Filtration, the largest in company history, to expand presence in durable aerospace, defense, and power generation markets. Mobile Solutions performance was bolstered by a major North American fleet win and significant market share gains in the independent aftermarket channel. Industrial Solutions sales grew 8%, primarily driven by the acquisition of Facet, while the IFS sub-segment declined 2% as robust power generation new equipment was offset by lower dust collection volumes. Life Sciences growth was accelerated by the technology shift to HAMR in disk drives and expanding high-purity applications in food and beverage and microelectronics. Operational efficiency and pricing benefits drove record operating margins of 16% for the full year, despite select input cost inflation and Middle East conflict impacts. Restructured the Life Sciences segment to combine food and beverage with microelectronics under a new 'Process Filtration' banner to drive scalable growth. Forecasts record fiscal 2027 sales of over $4.1 billion, assuming a 7.5% increase driven by high-margin business growth and the full-year impact of Facet. Operating margin is expected to expand to a range of 16.6% to 17.2%, supported by pricing benefits and Facet's higher structural gross margins. Guidance assumes a 'back-half tilt' with 57% of operating profit expected in the second half of the year due to typical seasonality and operational recovery timelines. Industrial margins are projected to return to normalized levels in the second half of 2027 as power generation operations stabilize at the Mexico facility. Capital allocation priorities remain focused on R&D for high-growth areas, disciplined M&A, and returning value through a 30-year streak of dividend increases. Facet acquisition is expected to be $0.12 dilutive to FY27 EPS due to approximately $22 million in incremental amortization and higher interest expense. Power generation margins were pressured by 40 basis points due to operational inefficiencies following a production shift to Mexico; recovery is expected by mid-FY27. Aerospace and Defense organic sales were impacted by supply chain constraints and the closure of a California facility, with recovery anticipated in the first half of FY27. Restarted share repurchase program with plans to buy back approximately 1% of outstanding shares to offset stock compensation dilution. Management clarified that early FY27 margin pressure is limited to acute issues in the power generation business and plant closure finalizations. Confirmed that Facet is accretive on a cash basis (excluding interest and amortization) despite the headline EPS dilution. One stock. Nvidia-level potential. 30M+ investors trust Moby to find it first. Get the pick. Tap here. The mid-teens organic growth target relies on resolving a 'late position' caused by moving production from California to Illinois. Management expects to return to operational normalcy by the end of the first half of FY27 as they work through backlogs. Strength in mining and construction is broad-based across all regions, while the U.S. trucking recovery is materializing as expected. Agricultural markets are showing 'green shoots' of improvement, though at a lower scale and with a wider range of outcomes than other segments. Traditional Life Sciences businesses already exceed company average margins; acquisitions are expected to reach similar high-margin milestones within 18 months. Growth is being driven by the AI/data center build-out and liquid cooling needs in the microelectronics sector. Non-data center CapEx is showing signs of improvement, with an acceleration of orders in the fourth quarter, particularly in the U.S. Management emphasized the durability of the business, noting that roughly half of IFS revenue is recurring replacement parts.

This article first appeared on GuruFocus. Total Sales: $3.9 billion for fiscal 2026, a 5% increase versus 2025; fourth quarter sales surpassed $1 billion for the first time, growing 8% above prior year. Adjusted EPS: $1.15 in the fourth quarter, 12% above 2025; full-year EPS grew 8% to a record $3.98. Operating Margin: 17.5% in the fourth quarter, up 110 basis points over prior year; full-year operating margin expanded to a record 16%. Gross Margin: Increased 190 basis points to 36.7% in the fourth quarter, an all-time company high. Mobile Solutions Sales: $635 million in the fourth quarter, up 8% driven by strong volume growth and pricing; pre-tax margin was a record 21.3%. Industrial Solutions Sales: $334 million in the fourth quarter, up 8% driven by the inclusion of Facet sales, which added $30 million or 10 percentage points of growth; pre-tax margin was 16.4%. Life Sciences Sales: $90 million in the fourth quarter, increased 10%; pre-tax margin was 11.9%, up 660 basis points from prior year. Aftermarket Sales (Mobile): $512 million, up 9% with increases in all regions and in both channels. Off-Road Sales: $95 million, flat to prior year with strength in construction offsetting muted performance in agriculture. On-Road Sales: $29 million, increased 9% as truck production began to ramp. IFS Sales: $257 million, declined 2%; replacement part sales grew in the low single-digits and accounted for 51% of total IFS sales. Aerospace and Defense Sales: $76 million, a 61% increase versus 2025, including Facet; organic sales declined 3%. China Sales: Up 27% due to a nearly 40% increase in OE replacement part sales. Fiscal 2027 Guidance: Record sales of over $4.1 billion, a 7.5% increase; operating margin expansion of 90 basis points to 16.9%; EPS of roughly $4.30, including approximately $0.12 of dilution from Facet; free cash flow conversion of approximately 95% to 105%. Capital Expenditures (Fiscal 2027): Expected to be between $70 million and $90 million. Interest Expense (Fiscal 2027): Expected to be between $55 million and $60 million, compared with $36 million in the prior year. Shareholder Returns: Returned $250 million to shareholders through dividends and share repurchases in fiscal 2026; expect to purchase about 1% of shares outstanding in fiscal 2027. Warning! GuruFocus has detected 7 Warning Signs with NTIOF. Is DCI fairly valued? Test your thesis with our free DCF calculator. Release Date: August 26, 2026 For the complete transcript of the earnings call, please refer to the full earnings call transcript. Record fiscal 2026 results with sales of $3.9 billion, EPS of $3.98, and operating margin of 16%, all all-time highs. Fourth quarter sales surpassed $1 billion for the first time, with adjusted EPS up 12% year-over-year. Strong aftermarket growth in Mobile Solutions, with sales up 9% and double-digit growth in the independent channel. Facet acquisition is performing in line with expectations, adding high-growth, high-margin sales and expanding presence in Aerospace and Defense and Power Generation. Fiscal 2027 guidance projects record sales over $4.1 billion, operating margin expansion to 16.9%, and EPS of approximately $4.30. Power Generation operations in Mexico continue to face inefficiencies, causing about 40 basis points of gross margin pressure in Q4, with full recovery not expected until mid-fiscal 2027. Organic Aerospace and Defense sales declined 3% in Q4 due to persistent supply chain constraints. Industrial Filtration Solutions sales declined 2% in Q4, impacted by lower dust collection new equipment volumes. Facet acquisition is expected to dilute EPS by approximately $0.12 in fiscal 2027 due to amortization and interest expenses. Interest expense is projected to rise to $55-$60 million in fiscal 2027, up from $36 million, due to Facet-related debt. Q: What are the main drivers behind Facet's lower-than-annualized EPS dilution in fiscal 2027, and how should we think about its contribution?A: Brad Pogalz (CFO) explained that the reduced dilution is driven by two primary factors: purchase accounting step-down and debt paydown. The fourth-quarter amortization was more substantial than the annualized rate of $22 million, and the company has already paid down over $100 million of Facet-related debt. Importantly, on a cash basis (business performance less interest expense), Facet is accretive in fiscal 2027, underscoring the strategic value of the acquisition. Q: What gives you confidence in the mid-teens organic growth guidance for Aerospace and Defense, and when will supply chain constraints be resolved?A: Rich Lewis (CEO) stated that the biggest challenge is ramping production at the new Illinois facility following the closure of the California site, with closure costs largely behind them. Teams are deployed to support the ramp, and weekly operational data shows improvement. The first half of the year will be spent clearing the late position and returning to normalcy. Broader supply chain issues are mostly under control, and the company is confident in its ability to work through the challenges over the fiscal year. Q: Can you unpack the underlying trends in Life Sciences and the dynamics between first-fit and replacement in Power Generation?A: Rich Lewis (CEO) highlighted strong demand in both Disk Drive and Process Filtration. Disk Drive growth is driven by a combination of share gains, pricing, and the technology shift to HAMR, which has significantly more content per drive. This growth trajectory is expected to extend beyond fiscal 2027. For Power Generation, the business is roughly 50% first-fit and 50% aftermarket. The first-fit side is very strong, expanding the install base, which will convert to aftermarket revenue in coming years. The company is booked out for the better part of the fiscal year with line of sight to full capacity through 2028. Q: How should we think about margins in the Life Sciences business going forward?A: Rich Lewis (CEO) noted that traditional Life Sciences businesses are already leading margins for Donaldson, above the company average. The expectation is for the entire segment to be significantly above the company average margin profile over time. As recent acquisitions mature and reach product and commercial milestones over the next 18 months, the business will continue to improve its margin contribution. Q: How is the dust collection business within IFS performing, and are you seeing increased customer willingness to deploy capital?A: Rich Lewis (CEO) reported an acceleration of orders through the fourth quarter across non-Power Gen IFS businesses, including dust collection. While not at the same level as other end markets, trends are positive. The first half of last year was muted, but improvement began in Q3 and accelerated in Q4. Quotes are starting to turn into orders, particularly in the US, providing good signals heading into fiscal 2027. Brad Pogalz (CFO) added that roughly half of the business is recurring revenue, providing a durable base when CapEx is softer. Q: Are there any underlying operational headwinds to be aware of given the fiscal 2027 margin guidance midpoint of ~17%?A: Rich Lewis (CEO) indicated that the company will start the year with continued pressure in the Industrial business, specifically from Power Generation first-half pressure related to clearing the Mexico facility. The company is also finishing plant closures initiated last year. These are acute issues rather than broad operational challenges. Brad Pogalz (CFO) emphasized normal seasonality, with 57% of operating profit expected in the second half, and noted the $22 million incremental amortization from Facet as a modeling consideration. Q: What are your expectations for first-fit performance in Mobile, and how might an agriculture recovery play out?A: Rich Lewis (CEO) described broad-based strength in mining and construction across all regions, which accelerated through Q3 and Q4 and continues into fiscal 2027. The trucking recovery is materializing as expected with sharp upturns in US build rates, though there is some uncertainty in the second half of next calendar year. Agriculture is starting to show more broad improvement, albeit at a lower scale, with green shoots appearing across product segments and the customer base. Q: What is driving the strong performance in China, and how sustainable is this growth?A: Rich Lewis (CEO) highlighted that China sales were up 27%, driven by a nearly 40% increase in OE replacement part sales. The company is winning new platforms, particularly in Off-Road, and the growing export market is driving demand. The razor-and-razor-blades model is working effectively, driving aftermarket sales strength and demonstrating the sustainability of the growth strategy in the region. For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Donaldson Company (NYSE:DCI) shares climbed 6.07% in premarket trading on Wednesday after the filtration products manufacturer delivered fourth-quarter earnings and revenue above Wall Street expectations. Adjusted earnings came in at $1.15 per share, ahead of the analyst consensus of $1.13, while quarterly revenue reached $1.1 billion, exceeding forecasts of $1.04 billion. Sales increased 8.0% from $980.7 million in the same quarter a year earlier, supported by higher volumes, pricing improvements and approximately $30 million of additional revenue from the Facet acquisition. Donaldson achieved record fourth-quarter sales and earnings as organic growth combined with the contribution from its recently acquired Facet Filtration business. “Donaldson’s fourth quarter sales and earnings reached an all-time high, driven by strong organic volume growth, augmented by the acquisition of Facet Filtration, and supported by robust execution across all three of our segments,” said Rich Lewis, president and chief executive officer. Profitability also improved during the quarter. Adjusted gross margin expanded by 190 basis points to 36.7%, compared with 34.8% a year earlier. Adjusted operating margin increased by 110 basis points to 17.5%. Donaldson reported higher sales across each of its main operating divisions during the fourth quarter. Mobile Solutions revenue increased 7.9%, with Aftermarket sales rising 9.4% and On-Road sales advancing 8.7%. Industrial Solutions delivered sales growth of 7.7%. The Facet acquisition contributed 980 basis points to the division’s growth during the period. Life Sciences also recorded a solid quarter, with sales increasing 9.7% from the previous year. Despite the stronger fourth-quarter performance, Donaldson’s fiscal 2027 earnings forecast came in below Wall Street expectations. The company expects full-year earnings per share of between $4.22 and $4.38. The midpoint of $4.30 compares with the analyst consensus estimate of $4.41. Donaldson noted that the guidance includes approximately $0.12 per share of dilution associated with the Facet acquisition. Full-year sales are forecast to increase between 5.5% and 9.5%. For fiscal 2027, Donaldson expects operating margin of between 16.6% and 17.2%, compared with an adjusted 16.0% in fiscal 2026. Mobile Solutions sales are forecast to grow between 2% and 6%, while Industrial Solutions revenue is expected to increase at a mid-teens percentage rate. The company also plans to repurchase approximately 1% of its outstanding shares during the year. While the fiscal 2027 earnings outlook was softer than analysts had anticipated, the positive premarket reaction reflected Donaldson’s record fourth-quarter performance, improving margins and continued sales growth across its businesses. Donaldson Company stock price

Interested in Donaldson Company, Inc.? Here are five stocks we like better. Donaldson delivered record fiscal 2026 results: Annual sales rose 5% to $3.9 billion, adjusted EPS increased 8% to $3.98, and operating margin reached 16%. Fourth-quarter sales topped $1 billion, with EPS up 12% to $1.15 and margin expanding to a record 17.5%. The Facet Filtration acquisition added about three percentage points to fourth-quarter sales growth and strengthened Donaldson’s aerospace, defense and power-generation businesses, but reduced quarterly EPS by $0.06. Management expects roughly $0.12 of dilution in fiscal 2027 while continuing to reduce acquisition-related debt. Fiscal 2027 guidance calls for continued growth: Sales are expected to increase 5.5% to 9.5%, EPS is projected at $4.22 to $4.38, and operating margin is forecast at 16.6% to 17.2%. Growth is expected across aftermarket, aerospace and defense, Life Sciences and industrial operations as production issues are resolved. Analysts Have "Buy" Rating On This Mid-Cap Dividend Achiever Donaldson (NYSE:DCI) reported record fiscal 2026 results, including annual sales of $3.9 billion and adjusted earnings per share of $3.98, as the filtration company cited growth across its Mobile Solutions, Industrial Solutions and Life Sciences segments. Sales rose 5% from fiscal 2025, while EPS increased 8% and operating margin reached a record 16%. For the fourth quarter, sales surpassed $1 billion for the first time, increasing 8% from the prior-year period. Adjusted EPS rose 12% to $1.15, while operating margin expanded 110 basis points to a record 17.5%. → What Rising Delivery Forecasts Say About Rivian's Stock Prospects “Fiscal 2026 was another record year for Donaldson Company,” President and CEO Rich Lewis said, pointing to the company’s growth strategy, operational efficiency efforts and the acquisition of Facet Filtration. Donaldson acquired Facet on May 4, 2026, making the fourth quarter the first period in which the company reported combined results. The acquisition, the largest in Donaldson’s history, expanded its positions in aerospace and defense and power generation, according to management. → NVIDIA Reveals $21 Billion SpaceX Stake: Signal of Confidence or Circular Financing? Chief Financial Officer Brad Pogalz said Facet added roughly three percentage points to fourth-quarter sales growth but reduced EPS by $0.06. Facet’s sales, gross margin and operating profit were in line with the company’s forecast, although amortization and interest expense were somewhat higher than expected. For fiscal 2027, management expects Facet to dilute EPS by about $0.12, reflecting incremental amortization and interest expense. Pogalz said the acquisition is accretive on a cash basis after accounting for business performance and interest expense. Donaldson has already repaid more than $100 million of Facet-related debt and reported net debt-to-EBITDA leverage of approximately 1.4 times. → Berkshire Boosts Its Bet: This AI Hyperscaler Is Now a Top-3 Holding Mobile Solutions revenue rose 8% to $635 million in the fourth quarter, supported by volume growth and pricing. Aftermarket sales increased 9% to $512 million, with growth in all regions and both channels. Lewis said the company posted double-digit growth in its independent channel and has begun realizing revenue from a major North American fleet win discussed in the previous quarter. First-fit off-road sales were flat at $95 million, as construction strength offset muted agricultural demand. On-road sales increased 9% to $29 million as truck production began to rise, particularly in the U.S. and Europe. Donaldson’s China business grew 27%, driven by a nearly 40% increase in original-equipment replacement-part sales. The company said it has been winning new off-road platforms and seeing demand from export markets. For fiscal 2027, Mobile Solutions sales are expected to rise 2% to 6%. Management forecast mid-single-digit off-road growth, supported by construction while agriculture remains subdued, and high-single-digit on-road growth as global truck production increases. Aftermarket sales are projected to rise mid-single digits through share gains and higher vehicle utilization. Industrial Solutions sales rose 8% to $334 million, including $30 million in Facet sales. Aerospace and defense revenue increased 61% to $76 million, though organic aerospace and defense sales declined 3% because of continuing supply-chain constraints. Industrial Filtration Solutions, or IFS, sales declined 2% to $257 million. Lower dust-collection new-equipment volumes were partly offset by strong power-generation new-equipment demand. IFS replacement-part sales grew in the low single digits and represented 51% of total IFS sales. Industrial Solutions pre-tax margin was 16.4%, down 450 basis points from the prior year. Pogalz attributed the decline to Facet-related expenses and amortization, organic expense deleveraging, and production-shift headwinds in power generation. Still, the segment’s margin improved 300 basis points sequentially from the third quarter. The company continues to stabilize operations at a Mexico power-generation plant following a production shift. Pogalz said the issue created approximately 40 basis points of consolidated gross-margin pressure in the fourth quarter, though throughput and delivery performance have improved. Donaldson expects to fully recover by the middle of fiscal 2027. Lewis also said the company expects to spend the first half of fiscal 2027 improving production at an Illinois facility following the closure of a California aerospace and defense site. Donaldson expects organic aerospace and defense sales to increase in the mid-teens during fiscal 2027 as it addresses supply constraints and works through elevated backlogs. Life Sciences sales increased 10% to $90 million, led by double-digit disk-drive growth and solid food-and-beverage demand. The segment’s pre-tax margin rose 660 basis points to 11.9%, aided by volume leverage in higher-margin food-and-beverage and disk-drive businesses, as well as expense discipline. Beginning in the first quarter, Donaldson will combine its food-and-beverage and microelectronics operations under the name Process Filtration. Lewis said the businesses share filtration technologies, engineering, manufacturing and regulatory capabilities. Management cited demand related to disk-drive HAMR technology, microelectronics, data-center artificial intelligence buildouts and liquid cooling. For fiscal 2027, Donaldson forecast: Total sales growth of 5.5% to 9.5%, with approximately two percentage points each from Facet and pricing, one point from currency, and the balance from organic volume. Operating margin of 16.6% to 17.2%, with the midpoint implying 90 basis points of expansion. EPS of $4.22 to $4.38, including approximately $0.12 of Facet-related dilution. Free cash flow conversion of 95% to 105% and capital expenditures of $70 million to $90 million. Management expects the second half of fiscal 2027 to account for about 52% of annual sales and 57% of operating profit, reflecting typical seasonality and anticipated industrial margin recovery. Donaldson also said it expects to repurchase roughly 1% of shares outstanding during the year, following the resumption of buybacks after the Facet acquisition. Donaldson Company, Inc (NYSE: DCI) is a global provider of filtration systems and replacement parts for a wide range of industries. The company develops and manufactures air, liquid and gas filtration solutions for engine and industrial applications, helping customers improve performance, lower emissions and extend equipment life. Donaldson's product portfolio includes engine air intake filters, fuel filters, hydraulic filters, compressor filters, dust collection systems and gas turbine air intake systems. Serving markets such as agriculture, construction, mining, power generation, aerospace and original equipment manufacturing, Donaldson operates through two primary business segments: Engine Products and Industrial Products. This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected]. The article "Donaldson Q4 Earnings Call Highlights" was originally published by MarketBeat. 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Donaldson (DCI) came out with quarterly earnings of $1.15 per share, beating the Zacks Consensus Estimate of $1.12 per share. This compares to earnings of $1.03 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of +2.68%. A quarter ago, it was expected that this maker of filtration systems would post earnings of $1.05 per share when it actually produced earnings of $1.06, delivering a surprise of +0.95%. Over the last four quarters, the company has surpassed consensus EPS estimates three times. Donaldson, which belongs to the Zacks Pollution Control industry, posted revenues of $1.06 billion for the quarter ended July 2026, surpassing the Zacks Consensus Estimate by 1.46%. This compares to year-ago revenues of $980.7 million. The company has topped consensus revenue estimates three times over the last four quarters. The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call. Donaldson shares have added about 5.2% since the beginning of the year versus the S&P 500's gain of 12.2%. While Donaldson has underperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock? There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately. Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions. Ahead of this earnings release, the estimate revisions trend for Donaldson was mixed. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #3 (Hold) for the stock. So, the shares are expected to perform in line with the market in the near future. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. It will be interesting to see how estimates for the coming quarters and the current fiscal year change in the days ahead. The current consensus EPS estimate is $1.04 on $997.83 million in revenues for the coming quarter and $4.37 on $4.11 billion in revenues for the current fiscal year. Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Pollution Control is currently in the bottom 14% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1. Core & Main (CNM), another stock in the broader Zacks Industrial Products sector, has yet to report results for the quarter ended July 2026. This distributor of water and fire protection products is expected to post quarterly earnings of $0.93 per share in its upcoming report, which represents a year-over-year change of +6.9%. The consensus EPS estimate for the quarter has remained unchanged over the last 30 days. Core & Main's revenues are expected to be $2.14 billion, up 2.3% from the year-ago quarter. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Donaldson Company, Inc. (DCI) : Free Stock Analysis Report Core & Main, Inc. (CNM) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Filtration equipment manufacturer Donaldson (NYSE:DCI) will be reporting earnings this Wednesday before market open. Here’s what investors should know. Donaldson beat analysts’ revenue expectations last quarter, reporting revenues of $995.1 million, up 5.9% year on year. It was a strong quarter for the company, with a solid beat of analysts’ organic revenue estimates and a decent beat of analysts’ EBITDA estimates. Is Donaldson a buy or sell going into earnings? Read our full analysis here, it’s free for active Edge members. This quarter, the market is expecting Donaldson’s revenue to grow 6.6% year on year, improving from the 4.8% increase it recorded in the same quarter last year. Analysts covering the company have generally reconfirmed their estimates over the last 30 days, suggesting they anticipate the business will stay the course heading into earnings. Donaldson has missed Wall Street’s revenue estimates multiple times over the last two years. Looking at Donaldson’s peers in the gas and liquid handling segment, some have already reported their Q2 results, giving us a hint as to what we can expect. SPX Technologies delivered year-on-year revenue growth of 22.9%, beating analysts’ expectations by 5.8%, and Parker-Hannifin reported revenues up 9.8%, topping estimates by 3.3%. SPX Technologies traded up 10.2% following the results while Parker-Hannifin was also up 7.7%. Read our full analysis of SPX Technologies’s results here and Parker-Hannifin’s results here. In the last twelve months or so, the market has shifted its attention from one area of macro importance to the next (AI disintermediation and AI capex spending to geopolitical conflict, rates, and whether the economy is on solid footing or not). While some of the gas and liquid handling stocks have shown solid performance in this choppy environment, the group has generally underperformed, with share prices down 2.8% on average over the last month. Donaldson’s stock price was unchanged during the same time and is heading into earnings with an average analyst price target of $98.80 (compared to the current share price of $92.47). WHILE YOU’RE HERE: The Next Palantir? One satellite company captures images of every point on Earth. Every single day. The Pentagon wants it. Hedge funds are using it to beat earnings. You’ve probably never heard of it. This is what the early days of Palantir looked like before it became a giant. Same playbook. Different technology. If you missed Palantir, you need to see this. Claim The Stock Ticker for Free HERE.