We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Donaldson Company, Inc. (DCI - Free Report) scored a hat-trick of earnings beats, as its third-quarter fiscal 2017 results surpassed estimates by a penny. The premium filtration products provider’s adjusted earnings per share of 45 cents beat the Zacks Consensus Estimate of 44 cents by 2.3%.
On a GAAP basis, the bottom-line figure of 45 cents was up 4.6% from 43 cents recorded in the prior-year quarter. Absence of pre-tax restructuring charges, sturdy top-line growth and streamlined operations proved conducive to the earnings performance.
Inside the Headlines
Donaldson reported total sales of $608.2 million, up 6.5% on a year-over-year basis. Also, revenues surpassed the Zacks Consensus Estimate of $579 million. Strong performance by the Engine Products segment drove the top line. The segment has been benefiting substantially from stabilization in market conditions and robust sales of replacement parts, resulting in overall top-line growth.
Revenues at the segment were up 13.5% year over year to $405.6 million. All the four sub-businesses within this segment – Aftermarket, Aerospace and Defense, and On Road and Off Road – grew on a year-over-year basis. Off-Road (up 27.5%), Aerospace and Defense (up 22.3%) and Aftermarket (11.1%) recorded double-digit growth. Meanwhile, On Road sub-segment (up 1.6%) returned to growth after a couple of sluggish quarters.
On the other hand, revenues at the Industrial Products segment declined 5.3% in fiscal 2017 to $202.6 million compared with the prior-year quarter. Lackluster performance by Gas Turbines Systems, which plunged 34.5% year over year, weighed on revenues. However, the Special Applications business, which was up 12.1%, offset this fall to some extent. Overall, sluggishness in first-fit demand, along with economic and geopolitical uncertainty, is hurting the profitability of this segment.
Donaldson’s adjusted operating margin expanded 70 basis points (bps) to 14.5% in the fiscal third quarter. In addition, the company’s Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”) were $107.6 million, up from $96.7 million recorded a year ago.
Donaldson Company, Inc. Price, Consensus and EPS Surprise
Donaldson exited the quarter with cash and equivalents of $295.9 million compared with $243.2 million as of Jul 31, 2016. The company had long-term debt of $298.1 million as of Apr 30, 2017 compared with $350.2 million as of Jul 31, 2016.
Share Repurchase Program/Dividends
During the fiscal third quarter, the company repurchased 1.3 million shares of its common stock for a total investment of $58.6 million. This takes the company’s overall year-to-date share repurchase to 2.7 million for a total investment of $110.4 million. Additionally, Donaldson paid $69.5 million in dividends year to date, out of which $23.1 million were paid during the fiscal third quarter.
2017 Guidance Raised
Concurrent with the earnings release, the company raised both its bottom- and top-line guidance for fiscal 2017 for the second time in a row. Donaldson projects fiscal 2017 adjusted earnings per share in the range of $1.67–$1.71 compared with the earlier guidance of $1.60–$1.68. The company believes that benefit from the Northern Technical, L.L.C. escrow settlement, which occurred in the fiscal first quarter, will supplement earnings growth.
Currently, the company projects fiscal 2017 sales to increase up to 6% from fiscal 2016, up from the previously guided range of 2–4%. The guidance hike is primarily attributable to the additional sales accruing from the recently acquired filtration systems firm, Hy-Pro Corporation. However, currency fluctuation is expected to play a spoilsport, offsetting some of this improvement.
In terms of segments, Donaldson estimates Engine Products sales to rise 10–11% year over year, mainly supported by robust performance of Aftermarket, Off-Road, and Aerospace and Defense. Also, the segment is expected to benefit by approximately $6 million from the recent acquisition of Hy-Pro.
For the Industrial Products segment, the company expects sales to decline in the range of 3–2% on a year-over-year basis. Unimpressive Gas Turbine Systems and Special Applications performance are expected to play spoilsport.
Our Take
Donaldson delivered a decent quarterly performance, marked by both top- and bottom-line beats, as well as modest year-over-year growth. Going forward, the company believes that strong Off-Road and Aftermarket sales will continue to act as solid growth drivers for the rest of the fiscal year. Overall, positive industry trends, including restocking, favorable commodity prices, decent rig counts and stable industrial production, are acting as tailwinds.
In addition, Donaldson’s solid financial health and its ability to take up bolt-on acquisitions are major positives. The recently completed Hy-Pro buyout is anticipated to enhance the company’s filtration portfolio. This apart, this Zacks Rank #2 (Buy) company’s diligent restructuring initiatives, ERP implementation program and strategic product launches to grab a greater market share are also expected to supplement growth.
Other Stocks to Consider
Some other top-ranked stocks in the industry are listed below:
ACCO Brands Corporation (ACCO - Free Report) has a positive average earnings surprise of 79.7% for the last four quarters and currently holds a Zacks Rank #2.
EnerSys (ENS - Free Report) has a positive average surprise of 5.1%, over the trailing four quarters, beating estimates throughout. The stock currently carries a Zacks Rank #2.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
Image: Bigstock
Donaldson (DCI) Q3 Earnings & Revenues Beat, Guidance Raised
Donaldson Company, Inc. (DCI - Free Report) scored a hat-trick of earnings beats, as its third-quarter fiscal 2017 results surpassed estimates by a penny. The premium filtration products provider’s adjusted earnings per share of 45 cents beat the Zacks Consensus Estimate of 44 cents by 2.3%.
On a GAAP basis, the bottom-line figure of 45 cents was up 4.6% from 43 cents recorded in the prior-year quarter. Absence of pre-tax restructuring charges, sturdy top-line growth and streamlined operations proved conducive to the earnings performance.
Inside the Headlines
Donaldson reported total sales of $608.2 million, up 6.5% on a year-over-year basis. Also, revenues surpassed the Zacks Consensus Estimate of $579 million. Strong performance by the Engine Products segment drove the top line. The segment has been benefiting substantially from stabilization in market conditions and robust sales of replacement parts, resulting in overall top-line growth.
Revenues at the segment were up 13.5% year over year to $405.6 million. All the four sub-businesses within this segment – Aftermarket, Aerospace and Defense, and On Road and Off Road – grew on a year-over-year basis. Off-Road (up 27.5%), Aerospace and Defense (up 22.3%) and Aftermarket (11.1%) recorded double-digit growth. Meanwhile, On Road sub-segment (up 1.6%) returned to growth after a couple of sluggish quarters.
On the other hand, revenues at the Industrial Products segment declined 5.3% in fiscal 2017 to $202.6 million compared with the prior-year quarter. Lackluster performance by Gas Turbines Systems, which plunged 34.5% year over year, weighed on revenues. However, the Special Applications business, which was up 12.1%, offset this fall to some extent. Overall, sluggishness in first-fit demand, along with economic and geopolitical uncertainty, is hurting the profitability of this segment.
Donaldson’s adjusted operating margin expanded 70 basis points (bps) to 14.5% in the fiscal third quarter. In addition, the company’s Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”) were $107.6 million, up from $96.7 million recorded a year ago.
Donaldson Company, Inc. Price, Consensus and EPS Surprise
Donaldson Company, Inc. Price, Consensus and EPS Surprise | Donaldson Company, Inc. Quote
Liquidity & Cash Flow
Donaldson exited the quarter with cash and equivalents of $295.9 million compared with $243.2 million as of Jul 31, 2016. The company had long-term debt of $298.1 million as of Apr 30, 2017 compared with $350.2 million as of Jul 31, 2016.
Share Repurchase Program/Dividends
During the fiscal third quarter, the company repurchased 1.3 million shares of its common stock for a total investment of $58.6 million. This takes the company’s overall year-to-date share repurchase to 2.7 million for a total investment of $110.4 million. Additionally, Donaldson paid $69.5 million in dividends year to date, out of which $23.1 million were paid during the fiscal third quarter.
2017 Guidance Raised
Concurrent with the earnings release, the company raised both its bottom- and top-line guidance for fiscal 2017 for the second time in a row. Donaldson projects fiscal 2017 adjusted earnings per share in the range of $1.67–$1.71 compared with the earlier guidance of $1.60–$1.68. The company believes that benefit from the Northern Technical, L.L.C. escrow settlement, which occurred in the fiscal first quarter, will supplement earnings growth.
Currently, the company projects fiscal 2017 sales to increase up to 6% from fiscal 2016, up from the previously guided range of 2–4%. The guidance hike is primarily attributable to the additional sales accruing from the recently acquired filtration systems firm, Hy-Pro Corporation. However, currency fluctuation is expected to play a spoilsport, offsetting some of this improvement.
In terms of segments, Donaldson estimates Engine Products sales to rise 10–11% year over year, mainly supported by robust performance of Aftermarket, Off-Road, and Aerospace and Defense. Also, the segment is expected to benefit by approximately $6 million from the recent acquisition of Hy-Pro.
For the Industrial Products segment, the company expects sales to decline in the range of 3–2% on a year-over-year basis. Unimpressive Gas Turbine Systems and Special Applications performance are expected to play spoilsport.
Our Take
Donaldson delivered a decent quarterly performance, marked by both top- and bottom-line beats, as well as modest year-over-year growth. Going forward, the company believes that strong Off-Road and Aftermarket sales will continue to act as solid growth drivers for the rest of the fiscal year. Overall, positive industry trends, including restocking, favorable commodity prices, decent rig counts and stable industrial production, are acting as tailwinds.
In addition, Donaldson’s solid financial health and its ability to take up bolt-on acquisitions are major positives. The recently completed Hy-Pro buyout is anticipated to enhance the company’s filtration portfolio. This apart, this Zacks Rank #2 (Buy) company’s diligent restructuring initiatives, ERP implementation program and strategic product launches to grab a greater market share are also expected to supplement growth.
Other Stocks to Consider
Some other top-ranked stocks in the industry are listed below:
Barnes Group Inc. (B - Free Report) has a solid earnings surprise history for the trailing four quarters, having beaten estimates thrice for an average beat of 8.9%. It holds a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
ACCO Brands Corporation (ACCO - Free Report) has a positive average earnings surprise of 79.7% for the last four quarters and currently holds a Zacks Rank #2.
EnerSys (ENS - Free Report) has a positive average surprise of 5.1%, over the trailing four quarters, beating estimates throughout. The stock currently carries a Zacks Rank #2.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
It's not the one you think.
See This Ticker Free >>