MINNEAPOLIS - Donaldson Company, Inc. (NYSE: NYSE:DCI), a leading provider of filtration solutions, reported a strong third quarter with a 6.0% increase in sales to $927.9 million, exceeding the analyst consensus of $915.84 million.
The announcement was followed by a 2.5% increase in Donaldson's stock price.
The company's earnings per share (EPS) for the quarter also surpassed expectations, coming in at $0.92, which was $0.08 higher than the estimated $0.84.
The company's robust performance is reflected in its raised full-year EPS guidance for fiscal 2024, now expected to be between $3.33 and $3.39, compared to the consensus estimate of $3.27.
Donaldson's chairman, president, and CEO, Tod Carpenter, attributed the strong quarter to record sales and earnings, with significant contributions from the company's diversified portfolio.
"The Donaldson team delivered outstanding performance in the third quarter, generating record sales and earnings with robust margins," said Carpenter. He also highlighted the company's strategic investments and focus on customer service as key factors in their success.
Segment-wise, the Mobile Solutions segment saw a 5.5% increase in sales, driven by a 10.9% rise in aftermarket sales, which benefited from market share gains and previous destocking. However, Off-Road and On-Road sales experienced decreases due to softer end-market demand. The Industrial Solutions segment reported a 2.9% increase in sales, with Aerospace and Defense growing by 5.9% thanks to strong market conditions. The Life Sciences segment stood out with a 24.2% surge in sales, largely due to Bioprocessing Equipment sales timing and Disk Drive.
The company's operating margin improved to 15.5%, up from 14.2% in the previous year, while gross margin increased by 260 basis points to 35.6%, thanks to higher sales, pricing benefits, and input cost deflation. Operating expenses as a percentage of sales rose to 20.1%, up from 18.8%, due to increased hiring and investments in scaling acquired Life Sciences businesses.
Looking ahead, Donaldson anticipates continued growth across its segments. Mobile sales are forecast to increase by 2% to 4%, while Industrial sales are expected to rise by 6% to 8%. Life Sciences sales are projected to grow in the mid-teens. The company's operating margin is forecast to be between 15.0% and 15.4%, with gross margin improvements expected to offset an increase in operating expenses.
Donaldson also plans to maintain its shareholder value through a projected repurchase of approximately 2% of its shares outstanding and anticipates a fiscal 2024 effective income tax rate of between 23% and 24%. Capital expenditures are estimated to be between $90 million and $105 million, with free cash flow conversion expected to be between 95% and 105%.
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