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Here's Why Donaldson (DCI) is a Good Investment Pick for 2022

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Donaldson Company, Inc. (DCI - Free Report) specializes in manufacturing and selling filtration systems and replacement parts worldwide. Its impressive financial performance and solid growth opportunities support upward revision in the company’s earnings estimates.

The Bloomington, MN-based company presently carries a Zacks Rank #2 (Buy). The stock belongs to the Zacks Pollution Control industry, which comes under the ambit of the Zacks Industrial Products sector. The industry is in the top 26% (with a rank of 69) of more than 250 Zacks industries.

In the past year, the company’s shares have gained 5.9% compared with the industry’s growth of 23.2%

Zacks Investment ResearchImage Source: Zacks Investment Research

What’s Making DCI an Attractive Investment Option for 2022?

Donaldson’s results in the first quarter of fiscal 2022 (ended Oct 31, 2021) were impressive, with earnings beating the Zacks Consensus Estimate by 10.91%.The bottom line expanded 27.1% from 48 cents reported in the first quarter of fiscal 2021. The Zacks Consensus Estimate for earnings is pegged at 62 cents per share for the second quarter of fiscal 2022 (ending January 2022) and 70 cents per share for the third quarter of fiscal 2022 (ending April 2022).

Several factors are in favor of Donaldson’s prospects for fiscal 2022 (ending July 2022). Solid product offerings, healthy demand and exposure to the diversified end markets are boons for the company. Focus on innovation, the benefits from buyouts and shareholder-friendly policies also raise the stock’s attractiveness. The company acquired Solaris Biotechnology in November 2021. This buyout is predicted to boost DCI’s presence in life sciences, food and beverage and biopharma end markets.

Segmental growth prospects are healthy for Donaldson. A rise in equipment production and projects wins are predicted to favor the Off-Road business in fiscal 2022. Aftermarket businesses are anticipated to gain from the solid utilization rate of equipment and a rise in market penetration. Aerospace and defense businesses are also predicted to be healthy. These tailwinds, partially offset by weakness in the On-Road business, are likely to favor the Engine Products segment. Also, the Industrial Products segment is likely to benefit from growth in Gas Turbine Systems, Industrial Filtration Solutions and Special Applications.

For fiscal 2022, Donaldson anticipates year-over-year revenue growth of 8-12%, up from 5-10% stated earlier. Adjusted earnings per share are estimated in the range of $2.57-$2.73, up from the previously guided $2.50-$2.66. Sales growth for the Engine Products segment and the Industrial Products segment is predicted to be 8-12% and 7-11%, respectively.

The Zacks Consensus Estimate for Donaldson’s earnings per share is pegged at $2.68 for fiscal 2022 and $2.97 for fiscal 2023 (ending July 2023), suggesting year-over-year growth of 15.5% and 10.8%, respectively. The consensus estimate has increased 1.9% for fiscal 2022 and 2.1% for fiscal 2023 in past the 60 days.

Donaldson Company, Inc. Price and Consensus

Donaldson Company, Inc. Price and Consensus

Donaldson Company, Inc. price-consensus-chart | Donaldson Company, Inc. Quote

Other Stocks to Consider

Three other top-ranked stocks from the industry are:

Casella Waste Systems, Inc. ((CWST - Free Report) ) presently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Its earnings surprise in the last reported quarter was 25.93%. The same for the last four quarters was 42.11%, on average.

In the past 60 days, the Zacks Consensus Estimate for Casella Waste’s earnings has increased 10% for 2021 and 11.4% for 2022. CWST’s shares have rallied 11.4% in the past three months.

Tetra Tech, Inc. (TTEK - Free Report) reported better-than-expected results in the last reported quarter, with earnings surpassing estimates by 5.00%. Its earnings surprise in the last four quarters was 10.49%, on average. The company presently carries a Zacks Rank #2.

The Zacks Consensus Estimate for Tetra Tech’s earnings has increased 4% for fiscal 2022 (ending September 2022) and 1.6% for fiscal 2023 (ending September 2023) in the past 60 days. TTEK’s shares have rallied 11.9% in the past three months.

Energy Recovery, Inc.’s (ERII - Free Report) results in the last reported quarter were impressive. Its earnings were 2 cents per share, while the Zacks Consensus Estimate was $0.00. Its last four quarters’ average earnings surprise was 123.33%. The company presently carries a Zacks Rank #2.

The Zacks Consensus Estimate for Energy Recovery’s earnings has increased 18.2% for 2021 and 39.3% for 2022 in the past 60 days. ERII’s shares have gained 8.2% in the past three months.