A month has gone by since the last earnings report for Donaldson (DCI Quick QuoteDCI - Free Report) . Shares have lost about 0.1% in that time frame, underperforming the S&P 500.

But investors have to be wondering, will the recent negative trend continue leading up to its next earnings release, or is Donaldson due for a breakout? Well, first let's take a quick look at the most recent earnings report in order to get a better handle on the recent drivers for Donaldson Company, Inc. before we dive into how investors and analysts have reacted as of late.

Donaldson's Q4 Earnings Beat Estimates, Sales Increase Y/Y

Donaldson reported fourth-quarter fiscal 2025 (ended July 31, 2025) adjusted earnings of $1.03 per share, which beat the Zacks Consensus Estimate of $1.02. The bottom line increased 9.6% year over year. In fiscal 2025, the company’s adjusted earnings were $3.68 per share, up 7.6% year over year.

Revenue Results

Total revenues of $981 million beat the Zacks Consensus Estimate of $954 million. The top line increased 4.8% year over year (up 2.9% at constant currency). 

Region-wise, Donaldson’s net sales in the United States/Canada increased 0.7% year over year. The metric increased 12.3% year over year in Europe, the Middle East and Africa, and decreased 0.7% in Latin America. Also, net sales in the Asia Pacific improved 6.6%.

In fiscal 2025, the company reported net revenues of $3.7 billion, which increased 2.9% year over year.

Donaldson reports revenues under three segments, namely Mobile Solutions, Industrial Solutions and Life Sciences.

A brief snapshot of segmental sales is provided below.

The Mobile Solutions segment’s (accounting for 60% of net sales) sales were $588.4 million, indicating a year-over-year increase of 2%. Sales rose 5% in Off-Road and decreased 20% in On-Road businesses during the quarter. Aftermarket sales improved 3% year over year.

Revenues generated from the Industrial Solutions segment (31.6%) were $309.8 million, up 8% year over year. Industrial Filtration Solutions' sales increased 11% year over year. Sales decline of 6% in the Aerospace and Defense businesses affected the results.

Revenues generated from the Life Sciences segment (8.4%) were $82.4 million, up 14% year over year. The results benefited from an increase in new equipment and replacement part sales in the food and beverage business.

Donaldson’s Margin Profile

In the fiscal fourth quarter, Donaldson’s cost of sales increased 6.9% year over year to $641.9 million. Gross profit declined 1.2% to $338.8 million. The gross margin of 34.5% declined 130 basis points, due to tariff-related inflation and related inventory valuation headwinds.

Operating expenses declined 0.8% year over year to $187.1 million. Operating profit increased 3.8% to $151.7 million. The operating margin was 15.5%, down 10 bps year over year.

The effective tax rate was 23.6% compared with 21.3% in the year-ago quarter.

Balance Sheet & Cash Flow

Exiting the fiscal fourth quarter, Donaldson’s cash and cash equivalents were $180.4 million compared with $232.7 million in the fourth quarter of fiscal 2024. Long-term debt was $630.4 million compared with $483.4 million in the fourth quarter of fiscal 2024.

In fiscal 2025, the company generated net cash of $418.8 million from operating activities, indicating a decrease of 15% year over year. Capital expenditure (net) totaled $76.8 million compared with $84.9 million in the year-ago fiscal period. Free cash flow decreased 16.1% to $342.0 million. In the same time frame, management repaid a long-term debt of $265 million.

It used $465 million to repurchase stocks and $95 million to pay out dividends during fiscal 2025.

Donaldson’s FY26 Outlook

For fiscal 2026 (ending July 2026), Donaldson expects adjusted earnings per share (EPS) to be in the range of $3.92-$4.08 compared with $3.68 in fiscal 2025. Sales are anticipated to increase 1- 5% from the fiscal 2025 level. Positive pricing is projected to have an accretive impact of 1%.

On a segmental basis, Mobile Solutions’ sales are expected to be flat to increase 4% from the fiscal 2025 level. Industrial Solutions’ sales are envisioned to jump in the range of 2-6% from the year-ago figure. The company forecasts its Life Sciences segment’s sales to increase in the low single-digit range.

Interest expenses are predicted to be approximately $22-$23 million, while other income is projected to be in the range of $14-$18 million. The effective tax rate is anticipated to be between 23.5% and 25.5%.

Capital expenditure is expected to be between $65 million and $85 million. Free cash flow conversion is anticipated to be in the range of 85-95%.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month.

VGM Scores

Currently, Donaldson has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a score 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Donaldson has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.