Donaldson Company, Inc. (NYSE:DCI) reported mixed first-quarter fiscal 2019 (ended Oct 31, 2018) results, with earnings lagging the Zacks Consensus Estimate but revenues beating the same.
Earnings & Revenues
Quarterly adjusted earnings came in at 56 cents per share, up 21.7% year over year. However, the bottom line missed the Zacks Consensus Estimate by a penny.
The company generated revenues of $701.4 million in the reported quarter, up 8.8% from the year-ago level. However, the top line marginally surpassed the Zacks Consensus Estimate of 700 million.
Segmental Break-Up
Quarterly revenues from the Engine Products segment came in at $480.9 million, up 8.8% year over year. Industrial Products segment’s revenues also improved 8.8% year over year to $220.5 million.
Donaldson Company, Inc. Price, Consensus and EPS Surprise
Donaldson Company, Inc. Price, Consensus and EPS Surprise | Donaldson Company, Inc. Quote
Costs & Margins
Cost of sales in the reported quarter was $463 million, up 10.1% from the year-ago quarter. Adjusted gross margin came in at 34%, down 80 basis points (bps) year over year.
Aggregate operating expenses in the fiscal first quarter were $139.7 million, up 3.4% year over year. Adjusted operating margin improved 30 bps year over year to 14.1% in the reported quarter.
Balance Sheet & Cash Flow
Exiting fiscal first quarter, Donaldson had cash and cash equivalents worth $199.9 million, down from $204.7 million recorded as of Jul 31, 2018. Long-term debt came in at $630.6 million, up from $499.6 million recorded at fiscal 2018-end.
In first-quarter fiscal 2019, the company generated $63.3 million cash from operating activities, down roughly 1% from the year-ago period. Capital expenditure in the reported quarter came in at $28.2 million, up 41.7% year over year.
Outlook
Donaldson perceives that ongoing contract wins, market share gains and favourable end-market conditions will aid it in boosting revenues and profitability in the quarters ahead. Moreover, the acquisition of BOFA International LTD (BOFA) (closed in Oct 22, 2018) is expected strengthen the Industrial business of this Zacks Rank #2 (Buy) stock. The company plans to offset the impact of material price inflation with its ongoing pricing actions.
Based on the existing market conditions, Donaldson now anticipates earnings in the range of $2.31-$2.45 per share for fiscal 2019 (ending July 2019), reflecting an increment of 2 cents from the prior view. The BOFA buyout is expected to boost the company’s sales by nearly 1% year over year in fiscal 2019. However, eliminating this impact, its revenue view is consistent with the prior guidance of 6-10%.
Other Stocks to Consider
Other top-ranked stocks within the Zacks Industrial Products sector are listed below:
ARC Document Solutions, Inc. (NYSE:ARC) sports a Zacks Rank #1 (Strong Buy). The company pulled off average positive earnings surprise of 133.33% in the trailing four quarters. You can see the complete list of today’s Zacks #1 Rank stocks here.
Energy Recovery, Inc. (NASDAQ:ERII) carries a Zacks Rank #2. The company delivered average positive earnings surprise of 204.17% in the past four quarters.
Applied Industrial Technologies, Inc. (NYSE:AIT) also carries a Zacks Rank of 2. The company recorded average positive earnings surprise of 11.67% in the past four quarters.
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Applied Industrial Technologies, Inc. (AIT): Free Stock Analysis Report
Energy Recovery, Inc. (ERII): Free Stock Analysis Report
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