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Donaldson Company (DCI)
NYSE:DCI

Donaldson Company (DCI) AI Stock Analysis

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Donaldson Company

(NYSE:DCI)

Rating:77Outperform
Price Target:
$78.00
▲(13.99%Upside)
Donaldson Company scores well due to strong financial performance and positive earnings call sentiment. Technical analysis and valuation suggest a stable outlook without significant upside potential. Recent corporate events further bolster the company's strategic position.
Positive Factors
Dividend Increase
The dividend per share has been raised by 11% year over year, which is likely to support positive sentiment for the stock.
Earnings Growth
Donaldson reported 7% earnings growth in the third quarter, supported by cost optimization efforts.
Shareholder Returns
The company's accelerated stock repurchases are now anticipated to be 3.5%-4.0% of shares outstanding, up from 2%-3% previously.
Negative Factors
Core Business Challenges
There is ongoing softness in the company's core businesses of Mobile Solutions and Industrial Solutions, which more than offsets improvements in other areas.
Impairment Charge
The Life Sciences growth strategy continues to weigh on performance as evidenced by a $62M impairment charge taken during the quarter related to two bioprocessing businesses as well as a one-time earn out reversal.
Revenue Decline
Revenue of $870 million declined 1% year-over-year.

Donaldson Company (DCI) vs. SPDR S&P 500 ETF (SPY)

Donaldson Company Business Overview & Revenue Model

Company DescriptionDonaldson 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.
How the Company Makes MoneyDonaldson Company makes money through the sale of its filtration systems and replacement parts across various industries. Key revenue streams include its Engine Products segment, which provides filtration solutions for construction, agriculture, and transportation equipment, and its Industrial Products segment, which caters to manufacturing, aerospace, and other industrial sectors. The company capitalizes on aftermarket sales, which provide a steady stream of revenue through replacement parts and maintenance services. Additionally, strategic partnerships and long-term contracts with original equipment manufacturers (OEMs) and distributors contribute significantly to its earnings. Donaldson's focus on research and development ensures a competitive edge, allowing it to innovate and meet evolving customer needs, further driving revenue growth.

Donaldson Company Earnings Call Summary

Earnings Call Date:Apr 30, 2025
(Q3-2025)
|
% Change Since: 4.79%|
Next Earnings Date:Aug 27, 2025
Earnings Call Sentiment Positive
The earnings call showcased a strong financial performance with record sales and earnings, increased dividends, and successful market share gains, particularly in the aerospace and defense, and mobile solutions segments. However, challenges included an impairment charge due to bioprocessing market headwinds, higher manufacturing costs, and declines in first fit businesses.
Q3-2025 Updates
Positive Updates
Record-Breaking Sales and Earnings
Donaldson delivered record sales and record adjusted earnings despite macro uncertainties, with sales rising 1% year over year to $940 million and adjusted EPS up approximately 8% versus the prior year.
Dividend Increase and Share Buyback
Donaldson announced an 11% increase in the quarterly dividend and repurchased 2.4% of outstanding shares, highlighting strong shareholder returns.
Aerospace and Defense Performance
Aerospace and defense sales reached an all-time high of $52 million, driven by robust market demand and successful navigation of supply chain challenges.
Mobile Solutions Market Share Gains
Sales in the mobile solutions segment grew, with aftermarket parts making up 75% to 80% of sales, and strong growth observed in China, particularly in off-road sales.
Industrial Solutions Margin Improvement
The industrial solutions segment saw volume growth and sequential profitability improvement, returning operating margins to above 18%.
Negative Updates
Intangible Assets Impairment
A $62 million pretax charge was recorded for the impairment of intangible assets in the bioprocessing businesses due to weak capital spending and extended drug development timelines.
Higher Manufacturing Costs
Gross margin decreased by 110 basis points due to higher manufacturing costs, including those related to footprint optimization initiatives.
Decline in First Fit Businesses
First fit businesses in mobile solutions faced cyclical headwinds, with off-road sales down 8% and on-road sales declining 25% due to ongoing weaknesses in transportation and agriculture markets.
Bioprocessing Market Weakness
The bioprocessing businesses continued to experience market headwinds, impacting sales and profitability.
Company Guidance
During Donaldson's Third Quarter Fiscal 2025 Earnings Call, the company reported a 1% year-over-year increase in sales, reaching $940 million, despite facing currency translation headwinds. The operating margin improved by 80 basis points compared to 2024, driven by expense leverage, and the adjusted EPS rose to $0.99, up approximately 8% from the prior year. Notably, Donaldson increased its quarterly dividend by 11% and repurchased 2.4% of its outstanding shares, contributing to a 3.3% year-to-date repurchase. The company's fiscal 2025 outlook projects a 1% to 3% total sales increase, with record operating margins between 15.6% and 16.0%, and an adjusted EPS range of $3.64 to $3.70, implying a solid 7% year-over-year increase. Key challenges included $62 million in pretax charges for intangible asset impairment and $4.2 million in restructuring costs, alongside initiatives aimed at footprint optimization and cost reduction.

Donaldson Company Financial Statement Overview

Summary
Donaldson Company exhibits a strong financial profile with consistent revenue growth and stable profit margins. The balance sheet reflects a stable financial position with manageable leverage. However, a decline in net profit margin and ROE highlights challenges in sustaining profitability. Cash flow remains positive, ensuring operational flexibility.
Income Statement
85
Very Positive
Donaldson Company demonstrates strong financial performance with a consistent revenue growth rate, evidenced by a 10.2% increase from 2023 to TTM 2025. The gross profit margin stands at 35.2% for TTM 2025, showing stability in profitability. However, a slight decline in net profit margin from 11.5% in 2024 to 9.9% in TTM 2025 suggests pressure on net earnings. Overall, robust revenue growth and solid margins contribute positively to the score.
Balance Sheet
78
Positive
The balance sheet reflects a stable financial position, with a debt-to-equity ratio of 0.49 in TTM 2025, indicating manageable leverage. The equity ratio of 48.9% suggests a strong capitalization structure. Return on equity decreased to 24.8% in TTM 2025 from 27.8% in 2024, which still indicates efficient use of equity. While the balance sheet is strong, the declining ROE indicates room for improvement.
Cash Flow
82
Very Positive
The company's cash flow statement shows a positive trajectory with a free cash flow growth rate of -26.6% from 2024 to TTM 2025, reflecting a decrease in free cash flow due to higher capital expenditure. The operating cash flow to net income ratio of 1.04 in TTM 2025 indicates sufficient cash generation relative to net income, supporting operational needs despite fluctuations in free cash flow.
Breakdown
TTMSep 2024Sep 2023Sep 2022Sep 2021Sep 2020
Income StatementTotal Revenue
3.65B3.59B3.43B3.31B2.85B2.58B
Gross Profit
1.28B1.27B1.16B1.07B971.70M871.60M
EBIT
489.90M544.10M480.20M443.50M384.70M340.10M
EBITDA
604.30M655.10M580.20M547.60M489.30M440.20M
Net Income Common Stockholders
362.40M414.00M358.80M332.80M286.90M257.00M
Balance SheetCash, Cash Equivalents and Short-Term Investments
178.50M232.70M187.10M193.30M222.80M236.60M
Total Assets
3.00B2.91B2.77B2.60B2.40B2.24B
Total Debt
722.40M536.70M655.70M648.00M527.60M700.70M
Net Debt
543.90M304.00M468.60M454.70M304.80M464.10M
Total Liabilities
1.53B1.43B1.45B1.47B1.26B1.25B
Stockholders Equity
1.46B1.49B1.32B1.13B1.14B992.90M
Cash FlowFree Cash Flow
298.60M406.90M426.40M167.70M343.60M264.60M
Operating Cash Flow
377.00M492.50M544.50M252.80M401.90M387.00M
Investing Cash Flow
-148.90M-86.90M-327.30M-154.00M-58.30M-128.90M
Financing Cash Flow
-273.80M-355.90M-222.20M-114.20M-363.30M-199.50M

Donaldson Company Technical Analysis

Technical Analysis Sentiment
Neutral
Last Price68.43
Price Trends
50DMA
67.04
Positive
100DMA
67.66
Positive
200DMA
69.76
Negative
Market Momentum
MACD
0.27
Positive
RSI
48.01
Neutral
STOCH
13.68
Positive
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For DCI, the sentiment is Neutral. The current price of 68.43 is below the 20-day moving average (MA) of 69.14, above the 50-day MA of 67.04, and below the 200-day MA of 69.76, indicating a neutral trend. The MACD of 0.27 indicates Positive momentum. The RSI at 48.01 is Neutral, neither overbought nor oversold. The STOCH value of 13.68 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for DCI.

Donaldson Company Risk Analysis

Donaldson Company disclosed 18 risk factors in its most recent earnings report. Donaldson Company reported the most risks in the "Macro & Political" category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks

Donaldson Company Peers Comparison

Overall Rating
UnderperformOutperform
Sector (66)
Financial Indicators
Name
Overall Rating
Market Cap
P/E Ratio
ROE
Dividend Yield
Revenue Growth
EPS Growth
ITITT
82
Outperform
$11.79B23.8419.27%0.94%6.99%23.25%
WTWTS
79
Outperform
$8.03B27.5417.61%0.86%3.89%8.17%
DCDCI
77
Outperform
$8.04B23.1824.58%1.74%3.26%-7.70%
MWMWA
73
Outperform
$3.67B25.5917.68%1.14%10.96%43.44%
RRRRX
72
Outperform
$9.22B39.593.69%1.01%-10.19%
AOAOS
70
Outperform
$8.99B17.6827.97%2.15%-1.60%-7.12%
66
Neutral
$4.46B12.155.40%4.71%4.16%-11.97%
* Industrials Sector Average
Performance Comparison
Ticker
Company Name
Price
Change
% Change
DCI
Donaldson Company
68.43
-2.37
-3.35%
ITT
ITT
150.66
21.93
17.04%
MWA
Mueller Water Products
23.39
6.26
36.54%
RRX
Regal Rexnord
139.68
0.66
0.47%
AOS
A. O. Smith Corporation
63.08
-19.31
-23.44%
WTS
Watts Water Technologies
241.05
56.18
30.39%

Donaldson Company Corporate Events

Private Placements and FinancingBusiness Operations and Strategy
Donaldson Company Amends Credit Agreement, Boosts Financial Flexibility
Positive
Jun 17, 2025

On June 12, 2025, Donaldson Company, Inc. amended its existing Credit Agreement to extend the maturity date of its revolving credit facility to June 12, 2030, and increased its credit limit to $600 million. The amendment also introduced a new $200 million term loan facility, which was fully advanced on the closing date, and increased the incremental credit facility option to $350 million. These changes are expected to enhance the company’s financial flexibility and support its strategic initiatives.

The most recent analyst rating on (DCI) stock is a Hold with a $71.00 price target. To see the full list of analyst forecasts on Donaldson Company stock, see the DCI Stock Forecast page.

Executive/Board ChangesStock BuybackDividendsFinancial Disclosures
Donaldson Company Appoints New COO Amidst Strong Q3 Results
Positive
Jun 3, 2025

On June 2, 2025, Donaldson Company announced the appointment of Richard B. Lewis as Chief Operating Officer, effective August 1, 2025, with a significant increase in his compensation package. In its third quarter fiscal 2025 report, Donaldson highlighted record sales and adjusted earnings per share, despite a decrease in GAAP net earnings due to non-recurring charges. The company raised its full-year adjusted EPS guidance, accelerated share repurchases, and increased its quarterly dividend by 11%, reinforcing its strong market position and commitment to returning cash to shareholders.

The most recent analyst rating on (DCI) stock is a Hold with a $71.00 price target. To see the full list of analyst forecasts on Donaldson Company stock, see the DCI Stock Forecast page.

Executive/Board Changes
Donaldson Company’s President Announces Retirement
Neutral
May 15, 2025

On May 14, 2025, Thomas R. Scalf, President of Enterprise Operations and Supply Chain at Donaldson Company, announced his retirement effective August 1, 2025. Post-retirement, he will provide consulting services to the company until December 31, 2025, to ensure a smooth transition, receiving $40,000 monthly during this period.

The most recent analyst rating on (DCI) stock is a Hold with a $71.00 price target. To see the full list of analyst forecasts on Donaldson Company stock, see the DCI Stock Forecast page.

Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.