- Total Sales: $870 million, decreased 1% year-over-year; excluding currency, sales increased 1%.
- Adjusted EPS: $0.83, up 3% versus prior year.
- Gross Margin: 35.2%, flat compared to the prior year.
- Operating Margin: Increased 40 basis points to 15.2%.
- Mobile Solutions Sales: $548 million, down 1% versus 2024; excluding currency, sales grew 1%.
- Aftermarket Sales: $442 million, up 4% year-over-year.
- Industrial Sales: Decreased 4% to $254 million.
- Life Sciences Sales: $69 million, grew 9% compared with the prior year.
- Capital Expenditures: Forecast between $85 million and $100 million.
- Cash Conversion: Expected range of 85% to 95%.
- Share Repurchase: Expected to repurchase between 2% and 3% of outstanding shares this year.
- Warning! GuruFocus has detected 7 Warning Signs with AMBP.
Release Date: February 27, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Donaldson Co Inc (NYSE:DCI) reported an increase in total sales in constant currency, with earnings rising at a faster pace, reflecting overall margin improvement.
- The company successfully managed costs and pricing, maintaining strong expense discipline while continuing to invest for future growth.
- Mobile Solutions segment saw sales growth in constant currency, driven by solid aftermarket performance and nearly 100% fill rates.
- Partnership with Daimler Truck North America on hydrogen fuel cell projects positions Donaldson Co Inc (NYSE:DCI) at the forefront of hydrogen fuel cell innovation.
- Aerospace and Defense business outperformed expectations with record levels of demand for new equipment in commercial aerospace and strong defense orders.
Negative Points
- Sales were impacted by weak end market conditions in agriculture, transportation, industrial gases, dust collection, and bioprocessing.
- Currency translation negatively impacted sales by 170 basis points, contributing to a 1% year-over-year decrease in total sales.
- Mobile Solutions segment experienced a decline in on-road sales by 24% due to an exit from nonstrategic product sales and a decrease in global truck production.
- Industrial sales decreased by 4%, with Industrial Filtration Solutions sales down 8% due to slower investments in CapEx-based businesses and power generation project timing.
- Life Sciences segment faced ongoing weakness in bioprocessing, with early-stage capital spending still constrained.
Q & A Highlights
Q: Tod, you mentioned a recent win in China that reflects a structural shift favorable to Donaldson. Can you elaborate on this win and its implications for the company? A: This win is part of our ongoing success in China, where we leverage our technology-based platform. Specifically, it involves our liquid sector in hydraulics for tractors, showcasing our traction in this application alongside our air-based applications.
Q: Within Life Sciences, how does the profitability split between disk drive, food and beverage, and bioprocessing look, and what does this mean for future growth? A: Our traditional businesses are profitable, while acquisitions were largely pre-revenue. As new products are introduced over the next year, we expect these to enhance the segment's profitability.
Q: Regarding Mobile Solutions, there's a divergence between the OE and independent channels. Can you explain this and the outlook for aftermarket growth? A: The OE channel has seen increased focus on parts, while the independent channel, which is 60% of our business, has been more cautious. Despite this, we are achieving share gains and maintaining high fill rates, which supports our positive outlook.
Q: In Industrial Solutions, how are you adjusting for project risks in the second half, particularly in Power Gen and dust collection? A: Power Gen projects are large and can shift between quarters, but we remain bullish on this segment. The main challenge is in capital-based projects related to manufacturing, particularly in the automotive sector, where electrification has slowed.
Q: Can you provide more detail on the strength in Aerospace and Defense, and how supply chain improvements have impacted this segment? A: Both aerospace and defense are strong. We initially expected supply chain issues, but improvements have allowed us to increase guidance. The backlog and orders have always been strong, and overcoming supply chain hurdles has been key.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
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