Donaldson Clocks 18% Sales Growth In Q2; Raises FY22 Sales, EPS Guidance

Donaldson Co Inc DCI reported second-quarter FY22 sales growth of 18.2% year-over-year to $802.5 million, beating the consensus of $768.71 million.
Sales by segments: Engine Products $554.1 million (+19.8% Y/Y) and Industrial Products $248.4 million (+14.6% Y/Y).
The gross margin contracted by 205 bps to 31.1%. The operating income increased 25.8% Y/Y to $95.7 million, and the margin expanded by 72 bps to 11.9%.
EPS of $0.57 missed the consensus of $0.62.
Donaldson generated cash from operating activities year-to-date of $79.8 million, compared to $202.3 million a year ago. Free cash flow was $46.3 million.
Operating expenses as a percentage of sales were 19.2%, an improvement from 22% in 2Q21 due to leverage on higher sales.
Adjusted EBITDA increased 5.6% Y/Y to $121.7 million, and margin declined by 181 bps to 15.2%.
FY22 Outlook, updated: Donaldson sees EPS of $2.66 - $2.76 (previous range $2.57 - $2.73) versus the consensus of $2.67.
It expects net sales to increase 11% - 15% year-over-year (prior guidance 8% - 12% growth).
Donaldson anticipates gross margin to be down 1% - 1.5% Y/Y (prior decrease of 0.5% - 1%), reflecting higher inflationary pressures in the first half. Operating margin to be 14% - 14.4% (prior 14.1% - 14.7%).
Donaldson expects to repurchase about 2% of its outstanding shares during FY22.
Price Action: DCI shares closed lower by 2.71% at $52.80 on Tuesday.

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