Donaldson Company, Inc. (NYSE: DCI) stock falls on weak results

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Donaldson Company, Inc. (NYSE: DCI) stock fell over 6.3% on 3rd December, 2019 (as of  9:55 am GMT-5 ; Source: Google finance) after the company posted lower than expected results for the first quarter of FY 20. During the first quarter 2020, sales of Engine Products fell by 4.5 percent. The sales increase in Aerospace and Defense was on the back of new equipment in both commercial aerospace and ground defense. The declines in Off-Road and On-Road are due to lower levels of equipment production, with continued variability by geography. The Aftermarket decline is due to lower levels of equipment utilization, mainly in off-road markets. First quarter sales of Industrial Products fell by 3.2 percent.

DCI in the first quarter of FY 20 has reported the adjusted earnings per share of 51 cents, missing the analysts’ estimates for the adjusted earnings per share of 53 cents, according to Zacks Investment Research. The company had reported 4.1 percent fall in the adjusted revenue to $672.7 million in the first quarter of FY 20, missing the analysts’ estimates for revenue of $696.3 million. Donaldson’s first quarter 2020 earnings before interest, taxes, depreciation and amortization of sales fell to 16.7 percent, compared with 17.1% in 2019. However, the First quarter 2020 gross margin expanded by 0.4 percentage points to 34.4 percent from 34 percent in 2019. The gross margin increase is due to lower raw materials costs, combined with benefits from the Company’s efforts related to pricing initiatives and optimizing its supply chain, which was partially offset by loss of leverage on lower sales.

Additionally, during first quarter, DCI had repurchased 1.4 million shares, of its common stock at an average price of $47.95 for a total investment of $65.0 million. The Company had also paid $26.6 million of dividends in the first quarter.

For fiscal 2020, DCI expects adjusted EPS to be in the range of $2.05 and $2.21. Compared to 2019, fiscal 2020 sales are expected to be in a range between a 2 percent decline and a 4 percent increase. Compared to 2019, fiscal 2020 Engine sales are expected to be in a range between a 4 percent decline and a 2 percent increase, due to growth in Aerospace and Defense and Aftermarket, along with lower year-over-year sales in the Company’s first-fit On-Road and Off-Road businesses. Industrial sales are expected to increase from FY 19 between 2 and 8 percent, due to the growth in IFS and GTS, partially offset by declining sales in SA. Within Industrial, growth in IFS is due in part to one quarter of incremental benefits from the acquisition of BOFA. Currency translation is projected to negatively impact both segments by 1 to 2 percent.

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