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Donaldson (DCI) Gains on End-Market Strength Amid Cost Woes
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Donaldson Company, Inc. (DCI - Free Report) is poised to gain from its strong product portfolio, solid demand, growth investments and a focus on innovation. Also, exposure to diverse key sectors, such as construction, mining, aerospace, defense, and food & beverage, fortifies DCI's resilience to market fluctuations.
Continued strength in dust collection sales and power generation project timing within the industrial filtration solutions business and increasing defense sales within the Aerospace and Defense business are aiding the company’s Industrial Solutions segment. For fiscal 2024 (ending July 2024), the company expects Industrial Solutions sales to be up 3-7% year over year.
Donaldson aims to expand its market share, product offerings and customer base through strategic acquisitions. DCI acquired Univercells Technologies in June 2023, which expanded its growing offering in the life sciences industry. Univercells has been added to Donaldson’s Life Sciences segment. The company acquired Isolere Bio in February 2023. The Isolere buyout enables Donaldson to create leading separation and filtration solutions for emerging genetic-based drugs and Isolere’s revenues are reported within the Donaldson Life Sciences segment.
Donaldson’s measures to reward its shareholders through dividend payments and share buybacks are noteworthy. The company paid a dividend worth $30.2 million in the first three months of fiscal 2024 (ended October 2023). DCI bought back shares worth $53.3 million in the first three months of fiscal 2024. It is worth noting that the company’s quarterly dividend was hiked 8.7% in May 2023. For fiscal 2024, the company plans to buy back approximately 2% of its outstanding shares.
However, Donaldson’s Mobile Solutions segment is experiencing weakness due to end-market demand in China within the Off-Road business and inventory destocking in the original equipment portion within the Aftermarket business. Softness due to continued disk drive market weakness is concerning for the Life Sciences segment.
An increase in the operating expenses due to rising hiring and acquisition-related expenses is hurting Donaldson’s profitability. If not controlled, rising costs may dent the company's bottom line in the near term.
In the past year, this current Zacks Rank #3 (Hold) company has rallied 3% against the industry’s 7.4% decline.
Image Source: Zacks Investment Research
Stocks to Consider
Some better-ranked companies from the Industrial Products sector are discussed below:
FLS delivered a trailing four-quarter average earnings surprise of 27.3%. In the past 60 days, the Zacks Consensus Estimate for Flowserve’s 2023 earnings has increased 3.3%. The stock has risen 49% in the past year.
Applied Industrial Technologies, Inc. (AIT - Free Report) presently carries a Zacks Rank of 2. It has a trailing four-quarter average earnings surprise of 13.9%.
The consensus estimate for AIT’s fiscal 2024 earnings has increased 3.7% in the past 60 days. Shares of Applied Industrial have jumped 31% in the past year.
A. O. Smith Corporation (AOS - Free Report) currently carries a Zacks Rank of 2. The company delivered a trailing four-quarter average earnings surprise of 14%.
In the past 60 days, the consensus estimate for A. O. Smith’s 2023 earnings has improved 5%. The stock has risen 28.7% in the past year.
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Donaldson (DCI) Gains on End-Market Strength Amid Cost Woes
Donaldson Company, Inc. (DCI - Free Report) is poised to gain from its strong product portfolio, solid demand, growth investments and a focus on innovation. Also, exposure to diverse key sectors, such as construction, mining, aerospace, defense, and food & beverage, fortifies DCI's resilience to market fluctuations.
Continued strength in dust collection sales and power generation project timing within the industrial filtration solutions business and increasing defense sales within the Aerospace and Defense business are aiding the company’s Industrial Solutions segment. For fiscal 2024 (ending July 2024), the company expects Industrial Solutions sales to be up 3-7% year over year.
Donaldson aims to expand its market share, product offerings and customer base through strategic acquisitions. DCI acquired Univercells Technologies in June 2023, which expanded its growing offering in the life sciences industry. Univercells has been added to Donaldson’s Life Sciences segment. The company acquired Isolere Bio in February 2023. The Isolere buyout enables Donaldson to create leading separation and filtration solutions for emerging genetic-based drugs and Isolere’s revenues are reported within the Donaldson Life Sciences segment.
Donaldson’s measures to reward its shareholders through dividend payments and share buybacks are noteworthy. The company paid a dividend worth $30.2 million in the first three months of fiscal 2024 (ended October 2023). DCI bought back shares worth $53.3 million in the first three months of fiscal 2024. It is worth noting that the company’s quarterly dividend was hiked 8.7% in May 2023. For fiscal 2024, the company plans to buy back approximately 2% of its outstanding shares.
However, Donaldson’s Mobile Solutions segment is experiencing weakness due to end-market demand in China within the Off-Road business and inventory destocking in the original equipment portion within the Aftermarket business. Softness due to continued disk drive market weakness is concerning for the Life Sciences segment.
An increase in the operating expenses due to rising hiring and acquisition-related expenses is hurting Donaldson’s profitability. If not controlled, rising costs may dent the company's bottom line in the near term.
In the past year, this current Zacks Rank #3 (Hold) company has rallied 3% against the industry’s 7.4% decline.
Image Source: Zacks Investment Research
Stocks to Consider
Some better-ranked companies from the Industrial Products sector are discussed below:
Flowserve Corporation (FLS - Free Report) presently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
FLS delivered a trailing four-quarter average earnings surprise of 27.3%. In the past 60 days, the Zacks Consensus Estimate for Flowserve’s 2023 earnings has increased 3.3%. The stock has risen 49% in the past year.
Applied Industrial Technologies, Inc. (AIT - Free Report) presently carries a Zacks Rank of 2. It has a trailing four-quarter average earnings surprise of 13.9%.
The consensus estimate for AIT’s fiscal 2024 earnings has increased 3.7% in the past 60 days. Shares of Applied Industrial have jumped 31% in the past year.
A. O. Smith Corporation (AOS - Free Report) currently carries a Zacks Rank of 2. The company delivered a trailing four-quarter average earnings surprise of 14%.
In the past 60 days, the consensus estimate for A. O. Smith’s 2023 earnings has improved 5%. The stock has risen 28.7% in the past year.