Donaldson Company, Inc. (NYSE: DCI) Announces Record Second Quarter Fiscal 2026 Results

Key Highlights

• Record Second Quarter Sales: Donaldson reported sales of \$896 million, marking a 3.0% increase over the prior year period.
• GAAP Earnings Per Share (EPS): \$0.78, with adjusted EPS at \$0.80.
• Gross Profit: \$299.8 million for the quarter, compared to \$305.9 million in the prior year.
• Net Earnings: \$116.6 million before income taxes, with a net earnings margin of 13.2% and effective tax rate of 20.7%.
• Strong Cash Position: Cash and cash equivalents increased to \$189.1 million.
• Operating Margin: 13.2% for the quarter, compared to 14.0% in the prior year.

Operational and Financial Details

• Segment Performance:
  • Mobile Solutions Segment: Earnings before income taxes of 16.8% of segment sales.
  • Industrial Solutions Segment: Earnings before income taxes of 11.9% of segment sales.
  • Life Sciences Segment: Earnings before income taxes at 9.3% of segment sales, but negative for the six-month period at -0.7%.
• Restructuring and Business Development Charges: The quarter included pre-tax charges of \$2.9 million for restructuring and \$3.8 million for business development, both of which affected reported earnings.
• Stock-Based Compensation: \$16.0 million expensed in the quarter.
• Investing Activities: \$29.2 million spent on property, plant, and equipment, with proceeds from sales of \$10.8 million. No equity investments this quarter, compared to \$71.2 million in the prior year.
• Financing Activities: Net cash used in financing activities was \$(131.5) million, including treasury stock purchases of \$(111.2) million and dividends paid of \$(69.3) million.
• Goodwill: Increased to \$504.1 million, up from \$493.6 million at the end of fiscal 2025.
• Total Stockholders’ Equity: \$1,575.1 million, up from \$1,453.5 million at the prior year end.

Shareholder and Price Sensitive Information

• Record Sales and EPS: The company’s ability to deliver record sales and maintain strong EPS is positive for shareholders.
• Restructuring Charges: These could indicate ongoing efforts to optimize operations, which may lead to future margin improvements but also signal some short-term impacts on profitability.
• Business Development Charges: Investments in business development may point to potential growth, but also suggest increased expenditure.
• Decrease in Operating Margin: Operating margin declined from 14.0% to 13.2%, which may raise concerns about cost control or competitive pressures.
• Life Sciences Segment Performance: The negative earnings before income taxes for the six-month period in Life Sciences may be a concern for investors if the segment fails to recover.
• Significant Cash Outflows for Treasury Stock and Dividends: Indicates commitment to shareholder returns, but also reduces cash available for reinvestment.
• Strong Cash Position and Equity Growth: The increase in cash and stockholders’ equity strengthens the company’s financial foundation.

Additional Financial Metrics and Ratios

• Gross Margin: 33.5% for the quarter, down from 35.3% last year.
• EBITDA: 16.6% margin, down from 17.9% in the prior year.
• Cash Conversion Ratio: 19.4% for the quarter, up from 18.4%.
• Effective Tax Rate: 20.7%, down from 21.8% in the prior year.
• Dividends Paid Per Share: \$0.30 for the quarter.

Forward-Looking Statements and Risks

Donaldson cautions that its forward-looking statements are subject to a range of risks, including global economic conditions, supply chain disruptions, competitive pressures, currency fluctuations, customer concentration in cyclical industries, productivity targets, sustainability commitments, and vulnerabilities in information technology and intellectual property. The company’s actual results may differ materially from projections.

Summary

Donaldson’s second quarter fiscal 2026 results demonstrate ongoing revenue and earnings strength, with notable increases in sales and equity. However, operating margin compression and negative performance in Life Sciences, along with continued restructuring and business development costs, may raise concerns about future profitability and segment growth. The company’s robust cash position, active capital returns to shareholders, and ongoing investments suggest both stability and commitment to strategic growth.

Disclaimer

This article is for informational purposes only and does not constitute investment advice. All information is based on preliminary, unaudited results from Donaldson Company, Inc.’s second quarter fiscal 2026 financial report. Investors should review the full SEC filings and consider their own circumstances before making investment decisions. Past performance is not indicative of future results. The company undertakes no obligation to update forward-looking statements.

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