Donaldson Company (DCI - Snapshot Report) has sprung a
leak as it has missed its last two earnings reports. Today it is
Zacks Rank #5 (Strong Sell), and
Bear of the Day.
Filtering the Noise
The company provides filters for engines for both on and off road
as well as the Aerospace and Defense Industry. The engine
segment represents ~63% of the total sale while the industrial
unit accounts for 37% of sales.
Donaldson Company is a worldwide manufacturer of filtration
systems and replacement parts. The Company's product mix includes
air and liquid filtration systems and exhaust and emission
control products. The Company operates in two segments: Engine
Products and Industrial Products
Two Misses And A Meet
It was back to the October 2012 quarter, if you are looking for
the last time that the company posted a positive earnings
surprise. Since that time there have been two negative earnings
surprises and previous to the two misses there was a one
Projected Earnings Growth Drops
The Zacks Consensus Estimate has seen a decline over the past
several month for 2013 and 2014. In January of 2013, the
consensus stood at $1.77 but has trended lower to the current
level of $1.61. That same can be said of 2014, with Estimate
sliding from $1.98 to $1.83 over the same time horizons.
The valuation picture for DCI shows some mild premiums to the
market, and at least one discount. The trailing PE of 23x is
just below the 25x industry average. The Forward PE of 23x is
slightly higher than the 20.6x industry average. The price to
book is more than double the industry average while price to
sales also come in high of the mark. For the most part, the
premium given shares of DCI may not be warranted and other
competitors might how more promise.
A quick look at the price and consensus shows that company has
seen its estimates trend lower of late. While there was earnings
growth in 2010-2012, 2013 has been challenging for this stock.
There could be better plays if you are looking for filter
Brian Bolan is a Stock Strategist
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