Donaldson Stock Dips on Missed Estimates, Lower Outlook

The Bloomington-based maker of filtration systems lowered its sales and earnings outlook, saying it expects continued weakness in certain markets amid continued economic uncertainty.

Donaldson Company’s stock slid Monday on news that the manufacturer’s second-quarter earnings and revenue missed analyst estimates—and that the company had lowered its full-year outlook.

Donaldson, a Bloomington-based manufacturer of filtration systems, saw sales fall in its engine products segment due to weaker demand in the trucking industry. Donaldson provides filtration systems to the trucking, aerospace, energy, and other industries.

Companywide earnings for the quarter that ended January 31 totaled $51 million, or 34 cents per share, down about 6 percent from $54 million, or 35 cents per share, during the same period a year ago. Analysts polled by Thomson Reuters had expected earnings of 38 cents per share.

Sales, meanwhile, climbed roughly 3 percent to $596 million but fell short of the $605 million that analysts had predicted.

Shares of Donaldson’s stock closed down about 2.8 percent Monday at $35.44.

Sales of Donaldson’s gas turbine products climbed 79 percent during the quarter, but the growth was offset by weak sales in the North American trucking market, the on- and off-road equipment markets in Asia, and the on- and off-road replacement filter market in Europe, the company said.

Meanwhile, Donaldson said its operating margin decreased to 11.9 percent; currency exchange rates caused sales to drop $1.7 million, or about 0.3 percent during the quarter; and operating expenses climbed 1.4 percent to $127.8 million. And Donaldson said ongoing economic uncertainty continues to be a concern.

“Based on input from key customers, we see current market conditions continuing in the near term due primarily to the ongoing high levels of global economic uncertainty,” CEO Bill Cook said in a statement.

Cook said that the company expects strength in its gas turbine business to help offset weakness in other areas—but Donaldson ultimately lowered its outlook for the full fiscal year.

Donaldson said it now expects full-year earnings to total $1.61 to $1.81 per share on sales of $2.5 billion, which would match the company’s record sales from the prior year. The company previously said it expected earnings to be between $1.68 and $1.88 per share, while sales were projected to grow by up to 4 percent.

Donaldson has been citing economic headwinds for a while. It was one of several Minnesota companies that lowered earnings expectations in late 2012 due to weakened end markets and a negative impact from changing currency rates.

But at least one local money manager selected Donaldson as his top Minnesota stock pick for 2013. Peter Johnson, assistant vice president and an analyst at St. Paul-based Mairs and Power, Inc., recently told Twin Cities Business that Donaldson’s stock dropped last year as the company faced “macro headwinds”—but he thinks those obstacles are temporary, and the company is positioned to grow.

Donaldson is among Minnesota’s 25 largest public companies based on revenue, which totaled $2.5 billion in its most recently completed fiscal year. It employs roughly 12,800 employees worldwide.