Donaldson Company, Inc.’s ( DCI Quick Quote DCI - Free Report) fourth-quarter fiscal 2023 (ended Jul 31, 2023) earnings of 78 cents per share met the Zacks Consensus Estimate, while sales missed the same by 1.9%. The bottom line declined 7.1% from the year-ago quarter’s 84 cents per share. Sales Results
In the fiscal fourth quarter, Donaldson’s net sales reached $879.5 million, reflecting year-over-year decline of 1.2%. In the reported quarter, sales decreased due to volume declines in Mobile Solutions and Life Sciences segments. The top line missed the Zacks Consensus Estimate of $896 million.
Region-wise, DCI’s net sales in the United States/Canada decreased 2% year over year. The same decreased 12.6% in Latin America and 6.9% in the Asia Pacific. However, the top line expanded 7.3% in Europe, the Middle East and Africa. Donaldson started reporting sales under three segments starting the fiscal second quarter of 2023. The segments are as follows: Mobile Solutions, Industrial Solutions and Life Sciences. A brief snapshot of the segmental sales is provided below: The Mobile Solutions segment’s (accounting for 61.7% of net sales in fourth-quarter fiscal 2023) sales were $542.5 million, reflecting a year-over-year decline of 4.8%. The results were negatively impacted by 0.4% decline in Off-Road and 6.7% decline in aftermarket sales. However, On-Road increased 5.5% in the quarter. Sales generated from the Industrial Solutions segment (accounting for 31.5% of net sales in fourth-quarter fiscal 2023) were $277.1 million, increasing 9.9% from the year-ago fiscal quarter. The results benefited from sales growth of 10.8% in Industrial Filtration Solutions and 4.3% in Aerospace and Defense. Sales generated from Life Sciences (accounting for 6.8% of net sales in fourth-quarter fiscal 2023) were $59.9 million, decreasing 11.9% from the year-ago fiscal quarter. Margin Profile
In the fiscal fourth quarter, Donaldson’s cost of sales increased 3.2% year over year to $579.4 million. Gross profit jumped 2.9% to $300.1 million. The gross margin increased 130 basis points (bps) to 34.1%. The margin results benefited from pricing benefits and the stabilization of input costs.
Operating expenses increased 10.6% year over year to $179.6 million. Operating profit in the quarter under review decreased 6.8% to $120.5 million. The operating margin was 13.7%, decreasing 80 bps year over year. The effective tax rate in the quarter was 21.7% compared with 21.4% in the year-ago quarter. Balance Sheet & Cash Flow
Exiting fourth-quarter fiscal 2023, Donaldson’s cash and cash equivalents were $187.1 million compared with $193.3 million recorded in the fourth quarter of fiscal 2022. Long-term debt was down 22.9% year over year to $496.6 million.
In fiscal 2023, Donaldson repaid its long-term debt of $219.6 million. In the same time period, DCI generated net cash of $544.5 million from operating activities, reflecting an increase of 115.4% from the year-ago figure. Capital expenditure (net) totaled $118.1 million compared with $85.1 million in the year-ago fiscal period. Free cash flow increased 154% to $426.3 million. DCI also used $141.8 million to repurchase treasury stocks and $114.4 million to pay out dividends during fiscal 2023. 2024 Outlook
For fiscal 2024 (ending July 2024), Donaldson expects earnings per share to be $3.14-$3.30. The company anticipates adjusted earnings to be $2.90-$3.04 per share. The Zacks Consensus Estimate for earnings is $3.16 per share. Sales are anticipated to increase 3-7% from the fiscal 2023 level. Positive pricing is anticipated to have an accretive impact of 2%. However, movement in foreign currencies is expected to negatively impact sales by 1%.
On a segmental basis, Mobile Solutions’ sales are anticipated to increase 1-5% from the fiscal 2023 level. The segment’s performance is likely to benefit from mid-single-digit growth in the aftermarket. On-road and off-road sales are both expected to be up in low-single digit, respectively. Sales growth for Industrial Solutions is anticipated to be 3-7% from the fiscal 2023 figure. The segment is likely to gain from mid-single-digit growth in Industrial Filtration Solutions and low-single digits growth in Aerospace and Defense. The company expects its Life Sciences segment’s sales to increase approximately 20%. Interest expenses are predicted to be approximately $25 million. The effective tax rate is anticipated to be 24-26%. Capital expenditure for the fiscal year is expected to be $95-$115 million. Free cash flow conversion is anticipated to be 95-105%. Share buybacks are expected to account for 2% of the outstanding shares. Zacks Rank & Stocks to Consider
Donaldson currently carries a Zacks Rank #3 (Hold). Some better-ranked companies from the
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