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On Oct 6, we issued an updated research report on Donaldson Company, Inc. (DCI - Free Report) .
In the past three months, this Zacks Rank #3 (Hold) stock has returned 9.9% compared with the industry’s growth of 17.3%.
Present Scenario
Donaldson has been benefiting from its strong product portfolio, focus on innovation and supply-chain optimization, expanding e-commerce business as well as growth investments. Also, stability across the company’s manufacturing replacement parts business, along with strength in the process filtration business in the food and beverage market, will likely prove beneficial in the quarters ahead.
Further, the company’s ability to generate healthy cash flows allows it to effectively deploy capital for repurchasing shares and paying out dividend. In fiscal 2020 (ended Jul 31, 2020), its free cash flow recorded an increase of 35.4% to $264.6 million, on a year-over-year basis. The company remains committed to rewarding shareholders handsomely through dividend payments and share buybacks. Notably, for fiscal 2021 (ending July 2021), total share buybacks will likely be a minimum of 1% of its outstanding shares.
However, weakness across its end-markets on account of the coronavirus outbreak-led issues weighs on its top line in the near term. For fiscal 2021, Donaldson kept its projections suspended. It expects sales in the first half of fiscal 2021 to decline on a year-over-year basis.
Moreover, Donaldson’s high-debt profile poses a concern. For instance, in the last five fiscal years (2016-2020), its long-term debt rose 11.9% (CAGR). Notably, the metric was $617.4 million at the end of fiscal 2020, reflecting growth of 5.6% on a year-over-year basis. Also, exiting fiscal 2020, its cash and cash equivalents balance were just $236.6 million. Further increase in debt levels can raise the company’s financial obligations.
Stocks to Consider
Some better-ranked stocks from the Zacks Industrial Products sector are II-VI Incorporated , Graphic Packaging Holding Company (GPK - Free Report) and NortonLifeLock Inc. . While II-VI currently sports a Zacks Rank #1 (Strong Buy), Graphic Packaging and NortonLifeLock carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
II-VI delivered a positive earnings surprise of 64.90%, on average, in the trailing four quarters.
Graphic Packaging delivered a positive earnings surprise of 16.53%, on average, in the trailing four quarters.
NortonLifeLock delivered a positive earnings surprise of 59.96%, on average, in the trailing four quarters.
Biggest Tech Breakthrough in a Generation
Be among the early investors in the new type of device that experts say could impact society as much as the discovery of electricity. Current technology will soon be outdated and replaced by these new devices. In the process, it’s expected to create 22 million jobs and generate $12.3 trillion in activity.
A select few stocks could skyrocket the most as rollout accelerates for this new tech. Early investors could see gains similar to buying Microsoft in the 1990s. Zacks’ just-released special report reveals 8 stocks to watch. The report is only available for a limited time.
Image: Bigstock
Donaldson Exhibits Bright Prospects Amid Pandemic Scare
On Oct 6, we issued an updated research report on Donaldson Company, Inc. (DCI - Free Report) .
In the past three months, this Zacks Rank #3 (Hold) stock has returned 9.9% compared with the industry’s growth of 17.3%.
Present Scenario
Donaldson has been benefiting from its strong product portfolio, focus on innovation and supply-chain optimization, expanding e-commerce business as well as growth investments. Also, stability across the company’s manufacturing replacement parts business, along with strength in the process filtration business in the food and beverage market, will likely prove beneficial in the quarters ahead.
Further, the company’s ability to generate healthy cash flows allows it to effectively deploy capital for repurchasing shares and paying out dividend. In fiscal 2020 (ended Jul 31, 2020), its free cash flow recorded an increase of 35.4% to $264.6 million, on a year-over-year basis. The company remains committed to rewarding shareholders handsomely through dividend payments and share buybacks. Notably, for fiscal 2021 (ending July 2021), total share buybacks will likely be a minimum of 1% of its outstanding shares.
However, weakness across its end-markets on account of the coronavirus outbreak-led issues weighs on its top line in the near term. For fiscal 2021, Donaldson kept its projections suspended. It expects sales in the first half of fiscal 2021 to decline on a year-over-year basis.
Moreover, Donaldson’s high-debt profile poses a concern. For instance, in the last five fiscal years (2016-2020), its long-term debt rose 11.9% (CAGR). Notably, the metric was $617.4 million at the end of fiscal 2020, reflecting growth of 5.6% on a year-over-year basis. Also, exiting fiscal 2020, its cash and cash equivalents balance were just $236.6 million. Further increase in debt levels can raise the company’s financial obligations.
Stocks to Consider
Some better-ranked stocks from the Zacks Industrial Products sector are II-VI Incorporated , Graphic Packaging Holding Company (GPK - Free Report) and NortonLifeLock Inc. . While II-VI currently sports a Zacks Rank #1 (Strong Buy), Graphic Packaging and NortonLifeLock carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
II-VI delivered a positive earnings surprise of 64.90%, on average, in the trailing four quarters.
Graphic Packaging delivered a positive earnings surprise of 16.53%, on average, in the trailing four quarters.
NortonLifeLock delivered a positive earnings surprise of 59.96%, on average, in the trailing four quarters.
Biggest Tech Breakthrough in a Generation
Be among the early investors in the new type of device that experts say could impact society as much as the discovery of electricity. Current technology will soon be outdated and replaced by these new devices. In the process, it’s expected to create 22 million jobs and generate $12.3 trillion in activity.
A select few stocks could skyrocket the most as rollout accelerates for this new tech. Early investors could see gains similar to buying Microsoft in the 1990s. Zacks’ just-released special report reveals 8 stocks to watch. The report is only available for a limited time.
See 8 breakthrough stocks now>>