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Donaldson: Donaldson Company Delivers Record Sales and Updates FY26 Outlook

Donaldson Company achieved record sales of $896 million in the second quarter, a 3% increase from the prior year, driven by growth across all three segments. Adjusted earnings per share were $0.83, flat versus the prior year, slightly below analyst estimates of $0.9. The company's underlying business is robust, with high backlogs and strong order intake. The Mobile Solutions segment contributed significantly with sales of $557 million, up 2% year-over-year. Industrial Solutions sales were $260 million, a 2% increase, while Life Sciences sales were $80 million, up 16%. The company updated its fiscal 2026 outlook, expecting record sales of $3.8 billion, operating margin expansion to 16.2%, and earnings per share of $3.97, roughly 8% above the prior year.

DCI

USD 92.76

0.64%

A-Score: 5.6/10

Publication date: February 26, 2026

Full Report

Author: Analystock.ai

šŸ“‹ Highlights
  • Record Q2 Sales: Achieved $896 million, up 3% YoY, driven by all three segments.
  • Facet Acquisition: Adds $110 million in sales, expected to close in next couple of quarters.
  • 2026 Outlook: Targets $3.8 billion sales, 16.2% operating margin, and $3.97 EPS (+8% YoY).
  • Life Sciences Growth: Sales rose 16% to $80 million, driven by HAMR technology demand.
  • Strong Balance Sheet: Net leverage ratio of 0.7x, maintaining S&P High-Yield Dividend Aristocrat status.

Segment Performance and Outlook

The Mobile Solutions segment is expected to pick up in the second half, driven by strength in the independent channel and a rebound in the first-fit business. The Life Sciences segment, particularly the Disk Drive business, has been performing well, driven by demand for HAMR technology. Richard Lewis, incoming CEO, noted that the market has room to grow, with customers building at high utilization rates, and HAMR has been successful, with plans to continue gaining market penetration. The company's filtration products are also used in data centers for liquid cooling, an area with increasing interest due to the shift from air cooling.

Acquisition and Strategic Developments

The company announced the acquisition of Facet, a filtration company with high single-digit growth rates, for a mix-positive deal that will enhance growth and margins. The acquisition is expected to close in the next couple of quarters and contribute to earnings accretion in year 2. The deal is expected to be strategically and financially beneficial, with a goal to achieve an acceptable return on capital in a 5-year time horizon. The company's capital allocation priorities remain unchanged, focusing on reinvesting in the company, disciplined M&A, dividends, and share repurchase.

Valuation and Financial Health

With a P/E Ratio of 28.33 and an EV/EBITDA of 17.93, the market seems to have priced in a significant level of growth and profitability. The company's strong balance sheet, with a net leverage ratio of 0.7x, and its commitment to returning capital to shareholders through dividends and share repurchases, are positives. The Dividend Yield stands at 1.29%, and the Free Cash Flow Yield is 3.25%, indicating a reasonable return for investors. The ROIC of 15.78% and ROE of 25.19% demonstrate the company's ability to generate returns on its capital and equity.

Donaldson's A-Score