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Here's Why You Should Avoid Betting on Donaldson (DCI) Now
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Donaldson Company, Inc. (DCI - Free Report) has failed to impress investors with its recent operational performance, owing to difficult end-market conditions amid the coronavirus outbreak and other woes. These are expected to adversely impact its earnings.
The Zacks Rank #4 (Sell) company has a market capitalization of $7.6 billion. Over the past year, it has gained 24.3% compared with the industry’s growth of 36.5%.
Let’s delve into the factors that might continue to take a toll on the firm.
Weak Demand Environment: Donaldson has been witnessing persistent weakness across its Industrial Filtration Solutions and Special Applications businesses, owing to the challenged end-market demand environment amid the pandemic. In second quarter of fiscal 2021 (ended Jan 31, 2021), sales across its Industrial Filtration Solutions and Special Applications businesses declined 3.3% and 8.1%, respectively, on a year-over-year basis. Going forward, the company remains wary about the uncertainties associated with the pandemic.
Rise in Costs & Expenses: The company has been dealing with escalating costs and expenses. In the fiscal second quarter, the company’s cost of sales increased 3.4% year over year to $453.8 million. Also, in the quarter, adjusted operating expenses increased 1.1% year over year to $140.2 million. Despite its focus on cost management, Donaldson anticipates its performance to face headwinds from rise in incentive compensation in the second half of fiscal 2021. In addition, hike in certain expenses that got subdued due to the pandemic might be concerning for the company.
Forex Woes: Given its widespread presence in international markets, the company is exposed to the unfavorable foreign currency movements. Fluctuations in foreign exchange rates might affect its top line in the quarters ahead.
Estimate Trend: In the past 60 days, analysts have increasingly become bearish on the company, as evident from negative earnings estimate revisions. Notably, the Zacks Consensus Estimate for its third-quarter fiscal 2021 (ended April 2021, results are awaited) earnings has trended down from 59 cents to 58 cents on one downward estimate revision against no upward revisions. Although, over the same timeframe, the consensus estimate for fiscal 2021 (ending July 2021) earnings has been stable at $2.22, the same for fiscal 2022 (ending July 2022) has trended down from $2.59 to $2.58 on one downward estimate revision against none upward.
Tennant delivered an earnings surprise of 140.84%, on average, in the trailing four quarters.
Barnes delivered an earnings surprise of 19.45%, on average, in the trailing four quarters.
Dover delivered an earnings surprise of 21.35%, on average, in the trailing four quarters.
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Zacks has released a special report to help you capitalize on the Internet of Things’s exponential growth. It reveals 4 under-the-radar stocks that could be some of the most profitable holdings in your portfolio in 2021 and beyond.
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Here's Why You Should Avoid Betting on Donaldson (DCI) Now
Donaldson Company, Inc. (DCI - Free Report) has failed to impress investors with its recent operational performance, owing to difficult end-market conditions amid the coronavirus outbreak and other woes. These are expected to adversely impact its earnings.
The Zacks Rank #4 (Sell) company has a market capitalization of $7.6 billion. Over the past year, it has gained 24.3% compared with the industry’s growth of 36.5%.
Let’s delve into the factors that might continue to take a toll on the firm.
Weak Demand Environment: Donaldson has been witnessing persistent weakness across its Industrial Filtration Solutions and Special Applications businesses, owing to the challenged end-market demand environment amid the pandemic. In second quarter of fiscal 2021 (ended Jan 31, 2021), sales across its Industrial Filtration Solutions and Special Applications businesses declined 3.3% and 8.1%, respectively, on a year-over-year basis. Going forward, the company remains wary about the uncertainties associated with the pandemic.
Rise in Costs & Expenses: The company has been dealing with escalating costs and expenses. In the fiscal second quarter, the company’s cost of sales increased 3.4% year over year to $453.8 million. Also, in the quarter, adjusted operating expenses increased 1.1% year over year to $140.2 million. Despite its focus on cost management, Donaldson anticipates its performance to face headwinds from rise in incentive compensation in the second half of fiscal 2021. In addition, hike in certain expenses that got subdued due to the pandemic might be concerning for the company.
Forex Woes: Given its widespread presence in international markets, the company is exposed to the unfavorable foreign currency movements. Fluctuations in foreign exchange rates might affect its top line in the quarters ahead.
Estimate Trend: In the past 60 days, analysts have increasingly become bearish on the company, as evident from negative earnings estimate revisions. Notably, the Zacks Consensus Estimate for its third-quarter fiscal 2021 (ended April 2021, results are awaited) earnings has trended down from 59 cents to 58 cents on one downward estimate revision against no upward revisions. Although, over the same timeframe, the consensus estimate for fiscal 2021 (ending July 2021) earnings has been stable at $2.22, the same for fiscal 2022 (ending July 2022) has trended down from $2.59 to $2.58 on one downward estimate revision against none upward.
Stocks to Consider
Some better-ranked stocks from the Zacks Industrial Products sector are Tennant Company (TNC - Free Report) , Barnes Group, Inc. (B - Free Report) and Dover Corporation (DOV - Free Report) . While Tennant currently sports a Zacks Rank #1 (Strong Buy), Barnes and Dover carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Tennant delivered an earnings surprise of 140.84%, on average, in the trailing four quarters.
Barnes delivered an earnings surprise of 19.45%, on average, in the trailing four quarters.
Dover delivered an earnings surprise of 21.35%, on average, in the trailing four quarters.
+1,500% Growth: One of 2021’s Most Exciting Investment Opportunities
In addition to the stocks you read about above, would you like to see Zacks’ top picks to capitalize on the Internet of Things (IoT)? It is one of the fastest-growing technologies in history, with an estimated 77 billion devices to be connected by 2025. That works out to 127 new devices per second.
Zacks has released a special report to help you capitalize on the Internet of Things’s exponential growth. It reveals 4 under-the-radar stocks that could be some of the most profitable holdings in your portfolio in 2021 and beyond.
Click here to download this report FREE >>