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Donaldson Company, Inc. (DCI - Free Report) is the only company from the pollution control industry on the Focus List, and it represented its space well earlier this week with a strong fiscal third-quarter performance.

The company, which is a leading worldwide provider of filtration systems, reported its fifth straight quarter with a positive earnings surprise. It also announced double-digit revenue growth. This comes less than a week after DCI raised its 2010 outlook based on preliminary numbers.

Donaldson is a great example of how a company's outlook is usually the most important factor in how its earnings estimates react. Expectations for this fiscal year, ending July 2010, haven't moved in the past 7 days since the official announcement, but are up substantially from 30 days ago due, in large part, to the raised guidance.

Fiscal Third Quarter Report

On Monday, Donaldson Company announced sales of $497.6 million for its fiscal third quarter, which marked a year-over-year advance of 20.4% from $413.4 million. This growth was attributed to improving global economic conditions, new product introductions and emerging market growth.

Specifically, the company's Engine Products segment saw sales jump 31% while the Industrial Products segment came in with a gain of 8%. Asia saw the biggest sales growth improvement at 25%, which is another example of the growing middle class in countries like China. Sales in Europe and the Americas grew by 17% and 10%, respectively.

Excluding items, earnings per share in the quarter reached 65 cents, representing a positive surprise of more than 10% over the Zacks Consensus Estimate of 59 cents. The result marked a continuation of DCI's impressive record for beating quarterly expectations, and accounts for an average surprise of nearly 19% in the past 4 quarters.

donaldson company eps surprises.

Now technically speaking, Donaldson Company reiterated its fiscal 2010 outlook for earnings per share between $2.10 and $2.20, excluding items, with sales of $1.83 billion to $1.86 billion.

In reality though, the company raised it to that level less than a week earlier on May 18. Previously, the company had expected EPS of $1.89 to $2.09 with revenue at $1.8 billion.

Earnings Estimates for Donaldson Company

There's been no reaction in earnings estimates for this fiscal year in the past 7 days, but that's not really a surprise (the only real surprise would have been if DCI somehow failed to live up to its preliminary numbers announced 6 days earlier.)

The true impact of the quarter, though, can be seen in the improvement over the past 30 days. The Zacks Consensus Estimate for this fiscal year is currently at $2.13 per share, which is up 7% from $1.99 a month earlier. In that time, the company has enjoyed 5 upward revisions out of 6 total estimates.

However, expectations for next fiscal year, ending July 2011, have been much more active. The Zacks Consensus Estimate is at $2.41 for the period, which is up 3% in 7 days on the backs of 3 upward revisions out of 10 total estimates. If you go back 30 days, that outlook is up 6.6% on 7 upward revisions.

donaldson company earnings trends.

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