Donaldson (DCI)'s Fourth Quarter Performance and Prospects Look Attractive

Donaldson Company (DCI) shares fell 0.82% to close at $31.31 on Monday trading session after reporting revenues and results that beat Wall Street Expectations.

Donaldson posted fourth quarterly net earnings of $56.3 million, or $0.41 per share, lower than the profit of $73 million, or $0.50 per share obtained in the year-ago period. Excluding items, it reported earnings per share of $0.45 for the quarter, which were less than the $0.50 per share obtained in the same quarter a year ago, but were higher than estimates by $0.03.

Revenue at $609.7 million was higher by $13.97 million than analyst's estimates but lower than the $668 million obtained in the same time frame the year before.

Donaldson Company operates as a worldwide manufacturer of filtration systems and replacement parts. It plans to generate annual savings of $35 million with restructuring actions. Also, the company continues investing in foreign markets. For example, the new plant in Poland or expanding distribution facilities in Latin America and Eastern Europe, are part of the growing plans. Moreover, it has made strategic moves with the acquisitions of Northern Technical or IFIL USA and is planning the purchase of Industrias Partmo in Colombia, for further products and distribution channels.

"Our fourth quarter performance exceeded our guidance, driven by better-than-expected sales combined with expense discipline across our Company," said Tod Carpenter, President and CEO. "Although some of our end markets became increasingly challenged and uncertain as the fiscal year progressed, we delivered local-currency sales growth of over 1 percent for the year".

For the year, the company reported full-year net earnings of $208.1 million, or $1.49 per share. Revenue was reported as $2.37 billion.

The stock plummeted about 18.9% in a year-to-date basis and more than 25% in the past 12 months. A strong dollar and weak commodity markets hurt the company. Forward-looking, Donaldson expects full-year 2016 sales to be in the range between $2.32 and $2.42 billion and adjusted EPS to be in a range of $1.56-$1.76.

The stock is trading nearly its 52-week low, but the P/E ratio is higher than the industry median. . Further, the company returns value to shareholders via dividends and share repurchases. On May 29, the Board of Directors declared a regular cash dividend of $0.17 per share, payable September 3, 2015, to Shareholders of record as of August 19, 2015. The declaration is the 240th consecutive quarterly cash dividend paid over the past 60 years. In the fourth quarter, the firm repurchased 1.57 million shares of its common stock at an average price of $35.05, totalizing $55.1 million. For the year, Donaldson repurchased 6.68 million shares, at an average price of $38.39 for a total of $256.3 million.

Published on Sep 2, 2015
By Omar Venerio
Capital Markets, Derivatives and Financial Management Professor, Master in Finance and CFA candidate. I am an independent trader of stocks and options and passionate about the stock market.

Copyrighted 2016. Content published with author's permission.

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