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Donaldson (DCI) Up 7.7% Since Last Earnings Report: Can It Continue?
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A month has gone by since the last earnings report for Donaldson (DCI - Free Report) . Shares have added about 7.7% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Donaldson due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Donaldson Q1 Earnings Beat Estimates, Revenues Miss
Donaldson reported first-quarter fiscal 2024 (ended Oct 31, 2023) earnings of 75 cents per share, which missed the Zacks Consensus Estimate of earnings of 72 cents per share. The bottom line matched the year-ago reported number.
Revenue Results
In the fiscal first quarter, total revenues of $846.3 million underperformed the Zacks Consensus Estimate of $856 million. The top line declined 0.1% in the reported quarter due to volume declines in the Mobile Solutions and Life Sciences segments.
Region-wise, DCI’s net sales in the United States/Canada increased 1.7% and expanded 3.4% in Europe, the Middle East and Africa, year over year. However, the same decreased 4.5% in Latin America and 7.1% in the Asia Pacific.
Donaldson started reporting revenues 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 63.8% of net sales in first-quarter fiscal 2024) sales were $540.0 million, reflecting a year-over-year decline of 2.7%.
The results were negatively impacted by a 9% decline in Off-Road and a 2% decline in aftermarket sales. However, On-Road increased 5% in the quarter.
Revenues generated from the Industrial Solutions segment (accounting for 29.1% of net sales in first-quarter fiscal 2024) were $246.2 million, increasing 7.2% from the year-ago fiscal quarter.
The results benefited from sales growth of 7% in Industrial Filtration Solutions and 6% in Aerospace and Defense.
Revenues generated from Life Sciences (accounting for 7.1% of net sales in first-quarter fiscal 2024) were $60.1 million, decreasing 4.1% from the year-ago fiscal quarter.
Margin Profile
In the fiscal first quarter, Donaldson’s cost of sales decreased 2.6% year over year to $545.4 million. Gross profit jumped 4.8% to $300.9 million. The gross margin increased 170 basis points (bps) to 35.6%. The margin results benefited from pricing benefits, deflation in freight and select material costs, and mix.
Operating expenses increased 5% year over year to $176.3 million. Operating profit in the quarter under review increased 4.5% to $124.6 million. The operating margin was 14.7%, decreasing 60 bps year over year.
The effective tax rate in the quarter was 25.1% compared with 25.2% in the year-ago quarter.
Balance Sheet & Cash Flow
Exiting first-quarter fiscal 2024, Donaldson’s cash and cash equivalents were $217.8 million compared with $187.1 million recorded in the fourth quarter of fiscal 2023. Long-term debt was $366.6 million compared with $496.6 million reported in the fourth quarter of fiscal 2023.
In the first three months of fiscal 2024, Donaldson repaid its long-term debt of $73.8 million.
In the same time, DCI generated net cash of $138.0 million from operating activities, reflecting an increase of 16.8% from the year-ago figure. Capital expenditure (net) totaled $23.2 million compared with $28.1 million in the year-ago fiscal period. Free cash flow increased 27.4% to $114.8 million.
DCI also used $53.3 million to repurchase treasury stocks and $30.2 million to pay out dividends during the first three months of fiscal 2024.
2024 Outlook
For fiscal 2024 (ending July 2024), Donaldson expects adjusted earnings per share to be $3.14-$3.30. Sales are anticipated to increase 3-7% from the fiscal 2023 level. Positive pricing is anticipated to have an accretive impact of 2%. Movement in foreign currencies is expected to positively impact sales by roughly 1%.
On a segmental basis, Mobile Solutions’ sales are anticipated to increase 1-5% from the fiscal 2023 level. Sales growth for Industrial Solutions is anticipated to be 3-7% from the fiscal 2023 figure. The company expects its Life Sciences segment’s sales to increase approximately 20%.
Interest expenses are predicted to be approximately $23 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 95-115%. Share buybacks are expected to account for 2% of the outstanding shares.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
VGM Scores
At this time, Donaldson has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Donaldson has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Donaldson is part of the Zacks Pollution Control industry. Over the past month, Tetra Tech (TTEK - Free Report) , a stock from the same industry, has gained 6.3%. The company reported its results for the quarter ended September 2023 more than a month ago.
Tetra reported revenues of $1.06 billion in the last reported quarter, representing a year-over-year change of +43.7%. EPS of $1.78 for the same period compares with $1.26 a year ago.
Tetra is expected to post earnings of $1.35 per share for the current quarter, representing a year-over-year change of +0.8%. Over the last 30 days, the Zacks Consensus Estimate remained unchanged.
Tetra has a Zacks Rank #4 (Sell) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of B.
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Donaldson (DCI) Up 7.7% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Donaldson (DCI - Free Report) . Shares have added about 7.7% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Donaldson due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Donaldson Q1 Earnings Beat Estimates, Revenues Miss
Donaldson reported first-quarter fiscal 2024 (ended Oct 31, 2023) earnings of 75 cents per share, which missed the Zacks Consensus Estimate of earnings of 72 cents per share. The bottom line matched the year-ago reported number.
Revenue Results
In the fiscal first quarter, total revenues of $846.3 million underperformed the Zacks Consensus Estimate of $856 million. The top line declined 0.1% in the reported quarter due to volume declines in the Mobile Solutions and Life Sciences segments.
Region-wise, DCI’s net sales in the United States/Canada increased 1.7% and expanded 3.4% in Europe, the Middle East and Africa, year over year. However, the same decreased 4.5% in Latin America and 7.1% in the Asia Pacific.
Donaldson started reporting revenues 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 63.8% of net sales in first-quarter fiscal 2024) sales were $540.0 million, reflecting a year-over-year decline of 2.7%.
The results were negatively impacted by a 9% decline in Off-Road and a 2% decline in aftermarket sales. However, On-Road increased 5% in the quarter.
Revenues generated from the Industrial Solutions segment (accounting for 29.1% of net sales in first-quarter fiscal 2024) were $246.2 million, increasing 7.2% from the year-ago fiscal quarter.
The results benefited from sales growth of 7% in Industrial Filtration Solutions and 6% in Aerospace and Defense.
Revenues generated from Life Sciences (accounting for 7.1% of net sales in first-quarter fiscal 2024) were $60.1 million, decreasing 4.1% from the year-ago fiscal quarter.
Margin Profile
In the fiscal first quarter, Donaldson’s cost of sales decreased 2.6% year over year to $545.4 million. Gross profit jumped 4.8% to $300.9 million. The gross margin increased 170 basis points (bps) to 35.6%. The margin results benefited from pricing benefits, deflation in freight and select material costs, and mix.
Operating expenses increased 5% year over year to $176.3 million. Operating profit in the quarter under review increased 4.5% to $124.6 million. The operating margin was 14.7%, decreasing 60 bps year over year.
The effective tax rate in the quarter was 25.1% compared with 25.2% in the year-ago quarter.
Balance Sheet & Cash Flow
Exiting first-quarter fiscal 2024, Donaldson’s cash and cash equivalents were $217.8 million compared with $187.1 million recorded in the fourth quarter of fiscal 2023. Long-term debt was $366.6 million compared with $496.6 million reported in the fourth quarter of fiscal 2023.
In the first three months of fiscal 2024, Donaldson repaid its long-term debt of $73.8 million.
In the same time, DCI generated net cash of $138.0 million from operating activities, reflecting an increase of 16.8% from the year-ago figure. Capital expenditure (net) totaled $23.2 million compared with $28.1 million in the year-ago fiscal period. Free cash flow increased 27.4% to $114.8 million.
DCI also used $53.3 million to repurchase treasury stocks and $30.2 million to pay out dividends during the first three months of fiscal 2024.
2024 Outlook
For fiscal 2024 (ending July 2024), Donaldson expects adjusted earnings per share to be $3.14-$3.30. Sales are anticipated to increase 3-7% from the fiscal 2023 level. Positive pricing is anticipated to have an accretive impact of 2%. Movement in foreign currencies is expected to positively impact sales by roughly 1%.
On a segmental basis, Mobile Solutions’ sales are anticipated to increase 1-5% from the fiscal 2023 level. Sales growth for Industrial Solutions is anticipated to be 3-7% from the fiscal 2023 figure. The company expects its Life Sciences segment’s sales to increase approximately 20%.
Interest expenses are predicted to be approximately $23 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 95-115%. Share buybacks are expected to account for 2% of the outstanding shares.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
VGM Scores
At this time, Donaldson has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Donaldson has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Donaldson is part of the Zacks Pollution Control industry. Over the past month, Tetra Tech (TTEK - Free Report) , a stock from the same industry, has gained 6.3%. The company reported its results for the quarter ended September 2023 more than a month ago.
Tetra reported revenues of $1.06 billion in the last reported quarter, representing a year-over-year change of +43.7%. EPS of $1.78 for the same period compares with $1.26 a year ago.
Tetra is expected to post earnings of $1.35 per share for the current quarter, representing a year-over-year change of +0.8%. Over the last 30 days, the Zacks Consensus Estimate remained unchanged.
Tetra has a Zacks Rank #4 (Sell) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of B.