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Donaldson's (DCI) Q4 Earnings Meet, Revenues Miss Estimates

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Donaldson Company, Inc. (DCI - Free Report) reported in-line earnings in fourth-quarter fiscal 2018 (ended July 2018) results.

Earnings/Revenues

Quarterly adjusted earnings came in at 58 cents per share, in line with the Zacks Consensus Estimate. However, the bottom line came in 13.7% higher than the year-ago tally. The company noted that this upside was backed by benefits from the company’s cost-reduction and price-realization initiatives.

Net sales in the reported quarter grew 9.8% year over year to $724.7 million. However, the top line missed the Zacks Consensus Estimate of $728 million.

Segmental Break-Up

Aggregate sales of the company’s Engine Products segment came in at $492.2 million, up 14% year over year.

The Industrial Products segment’s revenues inched up 1.9% year over year to $232.5 million.

Adjusted earnings for fiscal 2018 came in at $2.00 per share, climbing 18.3% year over year. The reported figure also marginally surpassed the Zacks Consensus Estimate of $1.99.

Net sales in fiscal 2018 improved 15.3% year over year to $2,734.2 million. The top line came in line with the Zacks Consensus Estimate.

Donaldson Company, Inc. Price, Consensus and EPS Surprise

 

Donaldson Company, Inc. Price, Consensus and EPS Surprise | Donaldson Company, Inc. Quote

Costs/Margins

The company’s cost of sales in the fiscal fourth quarter rose 9.6% year over year to $472 million. Adjusted gross profit margin was 34.9%, up 10 basis points (bps) from the year-ago tally.

Aggregate operating expenses in the reported quarter were $145.9 million, higher than $135.2 million recorded in the year-ago quarter. Adjusted operating margin in the reported quarter was 14.7%, up 40 bps year over year.

Adjusted gross profit margin for fiscal 2018 was 34.2%, down 50 bps from the year-ago tally.

Adjusted operating margin for the fiscal was 13.9%, flat year over year.

Balance Sheet/Cash Flow

Exiting fiscal 2018, Donaldson had cash and cash equivalents of $204.7 million, down from $308.4 million recorded as of Jul 31, 2017. Long-term debt came in at $499.6 million, down from $537.3 million recorded at the end of the prior fiscal.

In fiscal 2018, the company generated $262.9 million cash from operating activities, as against $317.8 million cash generated in the year-earlier period. Capital expenditure totaled $95.9 million, up from $63.5 million recorded in the comparable period last fiscal.

Donaldson repurchased 0.3 million and 2.6 million shares for $14.3 million and $122 million in the fourth quarter and fiscal 2018, respectively.

Outlook

Donaldson is poised to grow on the back of increased business penetration in key end-markets, higher production capacity and advanced technological investments.

Nevertheless, ongoing geopolitical uncertainty and prevailing inflationary pressure remain two key causes of concern for this Zacks Rank #3 (Hold) stock.

The company anticipates to generate adjusted earnings of $1.36-$2.00 per share in fiscal 2019. Also, aggregate sales growth for the fiscal is projected at 6-10%.

Stocks to Consider

Some better-ranked stocks in the same industry are listed below:

Energy Recovery, Inc. (ERII - Free Report) sports a Zacks Rank of 1 (Strong Buy), currently. The company pulled off an outstanding average positive earnings surprise of 261.11% over the past four quarters. You can see the complete list of today’s Zacks #1 Rank stocks here.

Advanced Emissions Solutions, Inc. (ADES - Free Report) holds a Zacks Rank #2 (Buy), at present. The company  generated an average positive earnings surprise of 16.40% over the trailing four quarters.

Tetra Tech, Inc. (TTEK - Free Report) also carries a Zacks Rank of 2. The company came up with an average positive earnings surprise of 10.85% during the same time frame.

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