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Donaldson (DCI) Q4 Earnings: What's in Store for the Stock?
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Donaldson Company, Inc. (DCI - Free Report) is set to report fourth-quarter and full-year fiscal 2016 results, before the opening bell on Sep 8.
Last quarter, the company posted a positive earnings surprise of 10.3%. Donaldson managed to beat earnings estimates thrice in the trailing four quarters with an average positive surprise of 2.1%.
Factors to Consider
Factors including modest “first-fit program” wins and consistent geographic expansion are expected to act as key growth drivers for Donaldson’s fiscal fourth-quarter results. Concerted efforts undertaken by the company to fortify its hold in Latin America and China are paying off. These are believed to boost top-line performance in the quarter to be reported.
Moreover, Donaldson’s constant deployment of state-of-the-art technologies to secure first-fit programs has been an integral part of its growth strategy. In this regard, we believe that the Down Flow Evolution family of dust collectors, launched a little more than a year ago in the U.S., will act as a prominent top-line growth driver. This product forayed into the Asian markets earlier this year, reporting double-digit sales during fiscal third quarter.
In addition, stellar market traction of PowerCore filtration offerings and liquid platform products are estimated to drive revenues. Notably, robust sales of Synteq XP filters, from the liquid platform family, in emerging countries such as China, India and Brazil as well as developed markets have boosted the company’s sales over the past few quarters.
Also, Donaldson’s diligent restructuring activities, which significantly enhanced operational efficiency, are expected to be conducive to bottom-line performance for the quarter to be reported. Donaldson benefited significantly from restructuring actions that were implemented over the last 12 months. Restructuring benefits and other cost controls enabled the company to increase sales sequentially by 10% for fiscal third quarter. We also believe that the recently completed ERP implementation program and other cost-cutting initiatives will improve key financials for the quarter under review and beyond.
Despite these positives, recent macroeconomic sluggishness is expected to dampen growth significantly for the fiscal fourth quarter. Factors like a decline in heavy-duty on-road transportation business as well as sluggishness in the global agriculture, mining equipment and construction markets are anticipated to play spoilsport for Engine Products sales. Moreover, waning U.S. defense spending and softness in the commercial aerospace add to Donaldson’s concerns.
Additionally, Industrial Products are likely to take a beating from project deferrals and volatility in global demand. Decline in disk drive, membrane and semiconductor businesses are adding to Donaldson’s woes. Also, slowdown in helicopter business is expected to adversely affect commercial aerospace products sales. This, in turn, is likely to limit top-line growth in the quarter to be reported.
This apart, currency fluctuations may hurt for the fiscal fourth-quarter results. During the fiscal third quarter, foreign currency headwinds caused sales to decline by $5.5 million. Concurrent with the fiscal third-quarter results, the company predicted sales to go down by $80 million in the full year. A significant part of this is likely to be weighted toward the fiscal fourth quarter, thereby thwarting growth.
Earnings Whispers
Our proven model does not conclusively show that Donaldson will beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.
Zacks ESP: Earnings ESP for the company is currently 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 50 cents.
Zacks Rank: Donaldson’s Zacks Rank #3, when combined with 0.00% ESP, makes surprise prediction difficult.
Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revision.
Stocks That Warrant a Look
Here are some companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:
Francesca's Holdings Corporation , expected to report earnings on Sep 7, has an Earnings ESP of +11.11% and a Zacks Rank #2.
Finish Line Inc. , expected to report earnings on Sep 23, has an Earnings ESP of +1.89% and a Zacks Rank #2.
Costco Wholesale Corporation (COST - Free Report) , expected to report earnings on Sep 29, has an Earnings ESP of +1.16% and a Zacks Rank #2.
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Donaldson (DCI) Q4 Earnings: What's in Store for the Stock?
Donaldson Company, Inc. (DCI - Free Report) is set to report fourth-quarter and full-year fiscal 2016 results, before the opening bell on Sep 8.
Last quarter, the company posted a positive earnings surprise of 10.3%. Donaldson managed to beat earnings estimates thrice in the trailing four quarters with an average positive surprise of 2.1%.
Factors to Consider
Factors including modest “first-fit program” wins and consistent geographic expansion are expected to act as key growth drivers for Donaldson’s fiscal fourth-quarter results. Concerted efforts undertaken by the company to fortify its hold in Latin America and China are paying off. These are believed to boost top-line performance in the quarter to be reported.
Moreover, Donaldson’s constant deployment of state-of-the-art technologies to secure first-fit programs has been an integral part of its growth strategy. In this regard, we believe that the Down Flow Evolution family of dust collectors, launched a little more than a year ago in the U.S., will act as a prominent top-line growth driver. This product forayed into the Asian markets earlier this year, reporting double-digit sales during fiscal third quarter.
In addition, stellar market traction of PowerCore filtration offerings and liquid platform products are estimated to drive revenues. Notably, robust sales of Synteq XP filters, from the liquid platform family, in emerging countries such as China, India and Brazil as well as developed markets have boosted the company’s sales over the past few quarters.
Also, Donaldson’s diligent restructuring activities, which significantly enhanced operational efficiency, are expected to be conducive to bottom-line performance for the quarter to be reported. Donaldson benefited significantly from restructuring actions that were implemented over the last 12 months. Restructuring benefits and other cost controls enabled the company to increase sales sequentially by 10% for fiscal third quarter. We also believe that the recently completed ERP implementation program and other cost-cutting initiatives will improve key financials for the quarter under review and beyond.
Despite these positives, recent macroeconomic sluggishness is expected to dampen growth significantly for the fiscal fourth quarter. Factors like a decline in heavy-duty on-road transportation business as well as sluggishness in the global agriculture, mining equipment and construction markets are anticipated to play spoilsport for Engine Products sales. Moreover, waning U.S. defense spending and softness in the commercial aerospace add to Donaldson’s concerns.
Additionally, Industrial Products are likely to take a beating from project deferrals and volatility in global demand. Decline in disk drive, membrane and semiconductor businesses are adding to Donaldson’s woes. Also, slowdown in helicopter business is expected to adversely affect commercial aerospace products sales. This, in turn, is likely to limit top-line growth in the quarter to be reported.
DONALDSON CO Price and EPS Surprise
DONALDSON CO Price and EPS Surprise | DONALDSON CO Quote
This apart, currency fluctuations may hurt for the fiscal fourth-quarter results. During the fiscal third quarter, foreign currency headwinds caused sales to decline by $5.5 million. Concurrent with the fiscal third-quarter results, the company predicted sales to go down by $80 million in the full year. A significant part of this is likely to be weighted toward the fiscal fourth quarter, thereby thwarting growth.
Earnings Whispers
Our proven model does not conclusively show that Donaldson will beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.
Zacks ESP: Earnings ESP for the company is currently 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 50 cents.
Zacks Rank: Donaldson’s Zacks Rank #3, when combined with 0.00% ESP, makes surprise prediction difficult.
Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revision.
Stocks That Warrant a Look
Here are some companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:
Francesca's Holdings Corporation , expected to report earnings on Sep 7, has an Earnings ESP of +11.11% and a Zacks Rank #2.
Finish Line Inc. , expected to report earnings on Sep 23, has an Earnings ESP of +1.89% and a Zacks Rank #2.
Costco Wholesale Corporation (COST - Free Report) , expected to report earnings on Sep 29, has an Earnings ESP of +1.16% and a Zacks Rank #2.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>