Donaldson Company, Inc. (DCI) Earnings & Analysis

Latest quarter

Donaldson reported Q4 FY2026 revenue of $1.1 billion, above the $1.0 billion consensus, and adjusted earnings per share of $1.15, above the $1.12 consensus. Revenue rose from $980.7 million a year earlier, while diluted EPS increased to $1.10 from $0.97.

CEO Rich Lewis said higher volume, including the Facet acquisition, and pricing benefits drove sales growth. Mobile Solutions sales rose as aftermarket sales increased across regions; Life Sciences benefited from disk-drive and food-and-beverage demand. Industrial Solutions sales also grew with Facet’s contribution, although Lewis said industrial filtration solutions sales declined as lower dust-collection equipment volumes offset some power-generation equipment growth.

Donaldson’s gross margin rose to 36.3% from 34.5%, and operating margin increased to 16.7% from 15.5%. CFO Brad Pogalz attributed adjusted gross-margin expansion to volume, pricing and mix, partly offset by input-cost inflation and power-generation inefficiencies. Free cash flow increased to $185.2 million from $149.6 million.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

CEO Rich Lewis said Donaldson was gaining share in its independent mobile aftermarket channel through product availability, reliability and consistency. He said sales from a North American fleet win had begun and that the company was working to deepen dealer relationships. In China, he attributed mobile sales growth to replacement-part demand, new platforms and exports.

Asked about mobile equipment markets, Lewis said mining and construction demand had broadened across regions and customers. He said truck production was recovering as expected, although he noted uncertainty further out. On Life Sciences, he pointed to pricing, share and a technology shift in disk drives, alongside new products in process filtration. He also cited data-center construction and liquid cooling as sources of demand for microelectronics filtration.

CFO Brad Pogalz said the adjusted gross-margin improvement reflected volume, pricing and mix, but that input-cost inflation and power-generation inefficiencies offset some of those benefits. He said Donaldson was stabilizing its Mexico plant after a production shift, with progress in throughput and delivery. Pogalz expects full recovery by the middle of fiscal 2027 and annualized savings of about $10 million from footprint optimization once facilities reach run-rate productivity in the second half.

Lewis said Donaldson and Facet were collaborating on product development and testing for newer target markets, and that teams had identified cross-selling opportunities. Asked about aerospace and defense supply constraints, he said the main challenge was ramping production in Illinois after a California facility closure; he expects the team to work through late orders in the first half of the fiscal year.

Pogalz said Donaldson had restarted share repurchases after pausing them following the Facet acquisition. He said capital spending would be divided between new technologies and products and maintaining and improving operational assets.

Guidance

For the new fiscal year, Donaldson expects FY2027 sales growth of 5.5% to 9.5% and EPS of $4.22 to $4.38, including approximately $0.12 of dilution from Facet.