Donaldson Company, Inc.’s (DCI - Free Report) fourth-quarter fiscal 2022 (ended Jul 31, 2022) earnings matched the Zacks Consensus Estimate of 84 cents, while sales surpassed the same by 1.3%.The bottom line improved 27.3% from the year-ago quarter’s 66 cents. Sales growth in the reported quarter was partially offset by the headwinds stemming from supply-chain constraints and higher cost of raw materials.
Revenue Results
In the fiscal fourth quarter, Donaldson’s net sales were $890 million, reflecting year-over-year growth of 15.1%. The top line surpassed the Zacks Consensus Estimate of $879 million.Regionwise, DCI’s net sales in the United States/Canada increased 32.2% year over year. The top line expanded 14.8% in Europe, the Middle East and Africa, 34.9% in Latin America and 8.4% in the Asia Pacific.
Donaldson reports revenues under the following segments: Engine Products and Industrial Products. A brief snapshot of the segmental sales is provided below:
Engine Products’ (accounting for 69.7% of net sales in fourth-quarter fiscal 2022) sales were $620.3 million, reflecting year-over-year growth of 17.5%.
The results were positively impacted by 20.5% growth in Off-Road, 20.7% in Aerospace and Defense, 17.7% in Aftermarket sales and 4.6% in On-Road.
Revenues generated from Industrial Products (accounting for 30.3% of net sales in fourth-quarter fiscal 2022) were $269.7 million, increasing 10.1% from the year-ago quarter’s figure.
Results benefited from sales growth of 13.5% in Industrial Filtration Solutions and 38.5% in Gas Turbine Systems. However, sales declined 16.6% in Special Applications.
Margin Profile
In the fiscal fourth quarter, Donaldson’s cost of sales increased 17.9% year over year to $598.4 million. Gross profit jumped 9.8% to $291.6 million, while gross margin declined 160 basis points (bps) to 32.8%. The margin results were negatively impacted by higher raw material costs, partially offset by favorable pricing.Operating expenses increased 5.6% year over year to $162.3 million. Operating profit in the quarter under review increased 15.4% to $129.3 million. Operating margin was 14.5%, flat year over year.
Effective tax rate in the quarter was 21.4% compared with 26% in the year-ago quarter.
Balance Sheet & Cash Flow
While exiting fourth-quarter fiscal 2022, Donaldson’s cash and cash equivalents were $193.3 million, down 13.2% from $222.8 million recorded in the last fiscal year’s comparable quarter. Long-term debt was up 39.8% year over year to $644.3 million.In fiscal 2022, Donaldson repaid the long-term debt of $90 million.
In fiscal 2022, DCI generated net cash of $252.8 million from operating activities, reflecting a decrease of 37.1% from the year-ago figure. Capital expenditure (net) totaled $85.2 million compared with $58.3 million in the year-ago fiscal period. Free cash flow decreased 51.2% to $167.7 million.
In fiscal 2022, DCI used $170.6 million to repurchase shares and $110.1 million to pay out dividends.
Outlook
For fiscal 2023 (ending July 2022), Donaldson expects earnings per share of $2.91-$3.07 compared with 2022 GAAP and adjusted EPS of $2.66 and $2.68, respectively. Sales are anticipated to increase 1-5% from the fiscal 2022 level. Positive pricing is anticipated to leave an accretive impact of 6%. However, movements in foreign currencies are expected to negatively impact sales by 4%.On a segmental basis, Engine Products sales are anticipated to increase 0-4% from the fiscal 2022 level. The segment’s performance is likely to benefit from mid-single digit growth in Aftermarket and Aerospace sales. Also, solid growth in Defense sales is anticipated to offset low-single digits declines in On-Road and Off-Road sales.
Sales growth for Industrial Products is anticipated to be 3-7% compared with the fiscal 2022 figure. The segment is likely to gain from high-single-digit growth in Industrial Filtration Solutions. Gas Turbine Systems sales are projected to be up low-single digits, while Special Applications sales are anticipated to be flat with the prior-year period’s figure.
Operating margin is expected to be 14.5-15.4% for fiscal 2023, suggesting an increase from the reported and adjusted operating margin of 13.4% and 13.5%, respectively, in fiscal 2022. Interest expenses are predicted to be $14.5-$15 million. Other income is likely to be approximately $17 million. Effective tax rate is anticipated to be 25-27%.
Capital expenditure for the fiscal year is expected to be $115-$135 million. Free cash flow conversion is anticipated to be 110-125%. Share buybacks are expected to account for 2% of outstanding shares.
Zacks Rank & Stocks to Consider
DCI currently carries a Zacks Rank #3 (Hold). Some better-ranked companies from the industrial products sector are discussed below:Applied Industrial Technologies, Inc. (AIT - Free Report) presently sports a Zacks Rank #1 (Strong Buy). AIT delivered a trailing four-quarter earnings surprise of 22.8%, on average. You can see the complete list of today’s Zacks #1 Rank stocks.
AIT’s earnings estimates have increased 5.8% for fiscal 2023 (ending June 2023) in the past 60 days. Its shares have rallied 4.1% in the past six months.
Greif, Inc. (GEF - Free Report) presently has a Zacks Rank #2 (Buy). GEF delivered a trailing four-quarter earnings surprise of 22.9%, on average.
GEF’s earnings estimates have increased 0.4% for fiscal 2022 (ending October 2022) in the past 60 days. Its shares have risen 18.3% in the past six months.
Valmont Industries, Inc. (VMI - Free Report) presently has a Zacks Rank of 2. VMI’s earnings surprise in the last four quarters was 13.7%, on average.
In the past 60 days, Valmont’s earnings estimates have increased 3.8% for 2022. The stock has rallied 26.9% in the past six months.
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Donaldson Company, Inc.’s (DCI - Free Report) fourth-quarter fiscal 2022 (ended Jul 31, 2022) earnings matched the Zacks Consensus Estimate of 84 cents, while sales surpassed the same by 1.3%.
The bottom line improved 27.3% from the year-ago quarter’s 66 cents. Sales growth in the reported quarter was partially offset by the headwinds stemming from supply-chain constraints and higher cost of raw materials.
Revenue Results
In the fiscal fourth quarter, Donaldson’s net sales were $890 million, reflecting year-over-year growth of 15.1%. The top line surpassed the Zacks Consensus Estimate of $879 million.
Regionwise, DCI’s net sales in the United States/Canada increased 32.2% year over year. The top line expanded 14.8% in Europe, the Middle East and Africa, 34.9% in Latin America and 8.4% in the Asia Pacific.
Donaldson reports revenues under the following segments: Engine Products and Industrial Products. A brief snapshot of the segmental sales is provided below:
Engine Products’ (accounting for 69.7% of net sales in fourth-quarter fiscal 2022) sales were $620.3 million, reflecting year-over-year growth of 17.5%.
The results were positively impacted by 20.5% growth in Off-Road, 20.7% in Aerospace and Defense, 17.7% in Aftermarket sales and 4.6% in On-Road.
Revenues generated from Industrial Products (accounting for 30.3% of net sales in fourth-quarter fiscal 2022) were $269.7 million, increasing 10.1% from the year-ago quarter’s figure.
Results benefited from sales growth of 13.5% in Industrial Filtration Solutions and 38.5% in Gas Turbine Systems. However, sales declined 16.6% in Special Applications.
Margin Profile
In the fiscal fourth quarter, Donaldson’s cost of sales increased 17.9% year over year to $598.4 million. Gross profit jumped 9.8% to $291.6 million, while gross margin declined 160 basis points (bps) to 32.8%. The margin results were negatively impacted by higher raw material costs, partially offset by favorable pricing.
Operating expenses increased 5.6% year over year to $162.3 million. Operating profit in the quarter under review increased 15.4% to $129.3 million. Operating margin was 14.5%, flat year over year.
Effective tax rate in the quarter was 21.4% compared with 26% in the year-ago quarter.
Balance Sheet & Cash Flow
While exiting fourth-quarter fiscal 2022, Donaldson’s cash and cash equivalents were $193.3 million, down 13.2% from $222.8 million recorded in the last fiscal year’s comparable quarter. Long-term debt was up 39.8% year over year to $644.3 million.
In fiscal 2022, Donaldson repaid the long-term debt of $90 million.
In fiscal 2022, DCI generated net cash of $252.8 million from operating activities, reflecting a decrease of 37.1% from the year-ago figure. Capital expenditure (net) totaled $85.2 million compared with $58.3 million in the year-ago fiscal period. Free cash flow decreased 51.2% to $167.7 million.
In fiscal 2022, DCI used $170.6 million to repurchase shares and $110.1 million to pay out dividends.
Outlook
For fiscal 2023 (ending July 2022), Donaldson expects earnings per share of $2.91-$3.07 compared with 2022 GAAP and adjusted EPS of $2.66 and $2.68, respectively. Sales are anticipated to increase 1-5% from the fiscal 2022 level. Positive pricing is anticipated to leave an accretive impact of 6%. However, movements in foreign currencies are expected to negatively impact sales by 4%.
On a segmental basis, Engine Products sales are anticipated to increase 0-4% from the fiscal 2022 level. The segment’s performance is likely to benefit from mid-single digit growth in Aftermarket and Aerospace sales. Also, solid growth in Defense sales is anticipated to offset low-single digits declines in On-Road and Off-Road sales.
Sales growth for Industrial Products is anticipated to be 3-7% compared with the fiscal 2022 figure. The segment is likely to gain from high-single-digit growth in Industrial Filtration Solutions. Gas Turbine Systems sales are projected to be up low-single digits, while Special Applications sales are anticipated to be flat with the prior-year period’s figure.
Operating margin is expected to be 14.5-15.4% for fiscal 2023, suggesting an increase from the reported and adjusted operating margin of 13.4% and 13.5%, respectively, in fiscal 2022. Interest expenses are predicted to be $14.5-$15 million. Other income is likely to be approximately $17 million. Effective tax rate is anticipated to be 25-27%.
Capital expenditure for the fiscal year is expected to be $115-$135 million. Free cash flow conversion is anticipated to be 110-125%. Share buybacks are expected to account for 2% of outstanding shares.
Zacks Rank & Stocks to Consider
DCI currently carries a Zacks Rank #3 (Hold). Some better-ranked companies from the industrial products sector are discussed below:
Applied Industrial Technologies, Inc. (AIT - Free Report) presently sports a Zacks Rank #1 (Strong Buy). AIT delivered a trailing four-quarter earnings surprise of 22.8%, on average. You can see the complete list of today’s Zacks #1 Rank stocks.
AIT’s earnings estimates have increased 5.8% for fiscal 2023 (ending June 2023) in the past 60 days. Its shares have rallied 4.1% in the past six months.
Greif, Inc. (GEF - Free Report) presently has a Zacks Rank #2 (Buy). GEF delivered a trailing four-quarter earnings surprise of 22.9%, on average.
GEF’s earnings estimates have increased 0.4% for fiscal 2022 (ending October 2022) in the past 60 days. Its shares have risen 18.3% in the past six months.
Valmont Industries, Inc. (VMI - Free Report) presently has a Zacks Rank of 2. VMI’s earnings surprise in the last four quarters was 13.7%, on average.
In the past 60 days, Valmont’s earnings estimates have increased 3.8% for 2022. The stock has rallied 26.9% in the past six months.
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Globally, electric car sales continue their remarkable growth even after breaking records in 2021. High gas prices have fueled his demand, but so has evolving EV comfort, features and technology. So, the fervor for EVs will be around long after gas prices normalize. Not only are manufacturers seeing record-high profits, but producers of EV-related technology are raking in the dough as well. Do you know how to cash in? If not, we have the perfect report for you – and it’s FREE! Today, don't miss your chance to download Zacks' top 5 stocks for the electric vehicle revolution at no cost and with no obligation.
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