Donaldson records strong fourth quarter across segments

September 6, 2018

Donaldson Company saw sales momentum and a better profit margin as it reported solid fourth quarter results across all geographies and segments.

The “strong finish to fiscal 2018” came despite inflationary pressure, said Tod Carpenter, the Bloomington-based company’s chairman and CEO.

The company’s earnings grew 50 percent to $102.4 million, or 78 cents per share, compared with the same period a year ago. Sales increased 9.8 percent to $724.7 million, including a 1.3 percent benefit from currency translations.

Adjusted for the impact of federal corporate tax cuts, acquisition-related and other cuts, earning were 58 cents a share, matching analysts’ expectations. Sales came in slightly less than expected.

For the fiscal year ended July 31, Donaldson reported record sales of $2.7 billion, up 15.3 percent year over year, and record adjusted earnings of $2 per share, up 18.3 percent.

The biggest gain for the year was in the company’s engine products segment, which saw annual sales increase 19 percent; the industrial products saw an 8.1 percent gain.

Sales from Donaldson’s gas turbine system business, within the industrial products segment, were down 36.5 percent during the quarter, but the company had anticipated a decline in large turbine projects and anticipates further declines in that category going forward

The company faced rising raw material costs due to inflation but was able to offset those increases by establishing price increases for its products. The company also had a tax benefit of $26 million in the fourth quarter due to the Federal Tax Cuts and Jobs Act.

The company is taking momentum gained in the fourth quarter to head into fiscal 2019, when it expects another year of record sales and earnings. Carpenter told analysts on the company’s conference call Donaldson expects local currency sales growth in the new fiscal year to grow 8 to 12 percent and earnings per share to increase from the mid-teens to low 20 percent range.

“Although there is a global uncertainty related to trade, and we still expect inflationary pressure on raw materials and freight, our plan reflects new sales and profit records in 2019,” Carpenter told analysts.

Shares of Donaldson closed at $53.77 per share, up 6.6 percent on Thursday. Over the last 52 weeks, shares have traded in the range of $42.59 to $53.88 per share.

Patrick Kennedy • 612-673-7926

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