Download PDF

1. Company Snapshot

1.a. Company Description

Donaldson Company, Inc.manufactures and sells filtration systems and replacement parts worldwide.The company operates through two segments, Engine Products and Industrial Products.


Its Engine Products segment provides replacement filters for air and liquid filtration applications; air filtration systems; liquid filtration systems for fuel, lube, and hydraulic applications; exhaust and emissions systems and sensors; indicators; and monitoring systems.This segment sells its products to original equipment manufacturers (OEMs) in the construction, mining, agriculture, aerospace, defense, and transportation markets; and to independent distributors, OEM dealer networks, private label accounts, and large fleets.The company's Industrial Products segment offers dust, fume, and mist collectors; compressed air purification systems; gas and liquid filtration for food, beverage, and industrial processes; air filtration systems for gas turbines; polytetrafluoroethylene membrane-based products; and specialized air and gas filtration systems for applications, including hard disk drives, semi-conductor manufacturing and sensors, indicators, and monitoring systems.


This segment sells its products to various dealers, distributors, OEMs of gas-fired turbines, and OEMs and end-users requiring air filtration solutions and replacement filters.Donaldson Company, Inc.was founded in 1915 and is headquartered in Bloomington, Minnesota.

Show Full description

1.b. Last Insights on DCI

Donaldson Company, Inc.'s recent performance was negatively impacted by weak Q2 earnings, with EPS missing expectations and margin compression across segments. The company's $820M Facet Filtration acquisition increased leverage to 1.8-2.0x, with accretion expected in FY2027. Management cited weaker demand and ongoing margin pressures, especially in Industrial Solutions, leading to a cut in FY guidance. Additionally, institutional investors such as American Century Companies Inc. and Alps Advisors Inc. reduced their holdings in the company. (Source: Marketbeat)

1.c. Company Highlights

2. 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.

Publication Date: Mar -01

📋 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.

3. NewsRoom

Card image cap

Donaldson Company Releases FY25 Sustainability Report, Advancing Filtration for a Thriving Future

Apr -13

Source: businesswire.com

Card image cap

JPMorgan Chase & Co. Raises Holdings in Donaldson Company, Inc. $DCI

Mar -22

Source: defenseworld.net

Card image cap

Dimensional Fund Advisors LP Buys 20,478 Shares of Donaldson Company, Inc. $DCI

Mar -10

Source: defenseworld.net

Card image cap

Donaldson Company, Inc. (DCI) Presents at 47th Annual Raymond James Institutional Investor Conference Transcript

Mar -04

Source: seekingalpha.com

Card image cap

American Century Companies Inc. Reduces Holdings in Donaldson Company, Inc. $DCI

Mar -03

Source: defenseworld.net

Card image cap

NYSE Content Update: Georgia Gov. Kemp + Atlanta Mayor Dickens to Ring Bell Ahead of World Cup

Mar -02

Source: prnewswire.com

Card image cap

Novo Nordisk, First Solar, And Corebridge Financial Are Among Top 10 Large Cap Losers Last Week (Feb. 23-Feb. 27): Are the Others in Your Portfolio?

Mar -01

Source: feeds.benzinga.com

Card image cap

Why Donaldson Stock Sank This Week, But You Shouldn't Sell in Panic

Feb -27

Source: fool.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (5.57%)

6. Segments

Mobile Solutions

Expected Growth: 5.5%

Donaldson's Mobile Solutions segment growth of 5.5% is driven by increasing adoption of clean air and fuel filtration systems in the automotive and industrial markets, coupled with rising demand for efficient filtration solutions in the oil and gas industry. Additionally, the company's strategic investments in digital technologies and expansion into emerging markets are contributing to the segment's growth.

Industrial Solutions

Expected Growth: 5.8%

Donaldson's Industrial Solutions segment growth of 5.8% is driven by increasing demand for filtration solutions in industrial processes, expansion in emerging markets, and strategic acquisitions. Additionally, the segment benefits from the company's focus on innovation, product diversification, and strong customer relationships, leading to market share gains and revenue growth.

Life Sciences

Expected Growth: 5.2%

Donaldson's Life Sciences segment growth of 5.2% is driven by increasing demand for bioprocessing and pharmaceutical products, expansion in emerging markets, and strategic acquisitions. Additionally, the company's innovative filtration solutions and strong relationships with key customers contribute to its growth momentum.

7. Detailed Products

Air Filtration Products

Donaldson's air filtration products are designed to capture contaminants and pollutants from the air, providing clean air for various industries such as industrial, commercial, and residential applications.

Liquid Filtration Products

Donaldson's liquid filtration products are designed to remove contaminants and impurities from liquids, providing clean fluids for various industries such as oil and gas, chemical processing, and power generation.

Gas Turbine Filtration Products

Donaldson's gas turbine filtration products are designed to provide clean air for gas turbines, improving efficiency and reducing downtime.

Dust Collection Products

Donaldson's dust collection products are designed to capture dust and other airborne contaminants, providing a cleaner and safer work environment.

Hydraulic Filtration Products

Donaldson's hydraulic filtration products are designed to remove contaminants and impurities from hydraulic fluids, improving system performance and reducing downtime.

Process Filtration Products

Donaldson's process filtration products are designed to remove contaminants and impurities from process fluids, improving product quality and reducing waste.

8. Donaldson Company, Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes for Donaldson Company, Inc. is medium due to the availability of alternative products in the market.

Bargaining Power Of Customers

The bargaining power of customers is high due to the presence of large and established customers who can negotiate prices and terms.

Bargaining Power Of Suppliers

The bargaining power of suppliers is low due to the company's ability to negotiate prices and terms with its suppliers.

Threat Of New Entrants

The threat of new entrants is medium due to the moderate barriers to entry in the industry.

Intensity Of Rivalry

The intensity of rivalry is high due to the presence of several established competitors in the market.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 33.18%
Debt Cost 3.95%
Equity Weight 66.82%
Equity Cost 9.39%
WACC 7.58%
Leverage 49.65%

11. Quality Control: Donaldson Company, Inc. passed 7 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Stock-Card
Watts Water Technologies

A-Score: 6.0/10

Value: 2.7

Growth: 6.9

Quality: 8.0

Yield: 1.0

Momentum: 8.5

Volatility: 8.7

1-Year Total Return ->

View Full Report
Stock-Card
A O Smith

A-Score: 5.8/10

Value: 4.0

Growth: 5.7

Quality: 7.8

Yield: 4.0

Momentum: 4.5

Volatility: 9.0

1-Year Total Return ->

View Full Report
Stock-Card
Donaldson

A-Score: 5.6/10

Value: 2.7

Growth: 5.8

Quality: 6.8

Yield: 2.0

Momentum: 7.0

Volatility: 9.3

1-Year Total Return ->

View Full Report
Stock-Card
ITT

A-Score: 5.6/10

Value: 2.7

Growth: 6.7

Quality: 6.7

Yield: 2.0

Momentum: 8.0

Volatility: 7.3

1-Year Total Return ->

View Full Report
Stock-Card
Nordson

A-Score: 5.1/10

Value: 2.5

Growth: 5.8

Quality: 7.1

Yield: 2.0

Momentum: 4.0

Volatility: 9.0

1-Year Total Return ->

View Full Report
Stock-Card
CSW Industrials

A-Score: 4.1/10

Value: 1.7

Growth: 8.1

Quality: 7.7

Yield: 0.0

Momentum: 2.0

Volatility: 5.3

1-Year Total Return ->

View Full Report

Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

89.24$

Current Price

89.24$

Potential

-0.00%

Expected Cash-Flows