Market Overview

Donaldson Company Reports Fourth Quarter and Full-Year 2019 Earnings

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Donaldson achieved record sales of $2.85 billion in 2019, an increase of 4.0 percent from 2018

In 2019, Donaldson invested $150 million of capital and returned $229 million to shareholders

Fiscal 2020 sales forecasted between a 2 percent decline and 4 percent increase

Operating margin expected to grow 0.3 to 0.9 percentage points in 2020, driven by gross margin

Donaldson Company, Inc. (NYSE:DCI) today reported 2019 net earnings of $58.0 million in fourth quarter and $267.2 million for the full year, compared with $102.4 million and $180.3 million, respectively, in 2018. Excluding certain one-time items in the current and prior years,1 adjusted earnings per share (EPS)2 were $0.61 in fourth quarter and $2.21 for the full-year 2019, an increase of 5.2 percent and 10.5 percent, respectively, from 2018. A reconciliation of GAAP to non-GAAP measures is attached to this press release.

"We generated record sales and profit in 2019, due in part to strong performance in our Advance and Accelerate3 businesses, and we made a record level of investments to drive long-term profitable growth," said Tod Carpenter, chairman, president and chief executive officer. "We were pleased with sales results last quarter, which matched our forecast, and earnings were also in line as a better-than-expected tax rate offset the impact of demand volatility on gross margin.

"Our fiscal 2020 plan reflects focused portfolio management in an uneven demand environment. It is likely that uncertainty related to global trade and the political environment will keep our customers cautious, and some of our engine-related end markets are nearing the peak of their economic cycle. As these factors affect demand, our innovative products with recurring revenue, combined with disciplined expense planning, give us greater stability and flexibility as we remain focused on the future. We are making incremental investments to drive our strategic priorities in 2020, and we are aggressively pursuing gross margin improvement opportunities. Our company is aligned on our strategic and operational objectives, and we are excited about our path to delivering another year of record profit."

1

See the "Accounting Considerations" section for more information about the adjusting items.

2

All earnings per share figures refer to diluted earnings per share. Adjusted earnings are a non-GAAP financial measure that exclude the impact of certain items not related to ongoing operations.

3

Advance & Accelerate includes Industrial Air Filtration (IAF) replacement parts, Engine Aftermarket, Venting Solutions, Process Filtration, Semiconductor and Industrial Hydraulics.

Operating Results

Fourth quarter 2019 sales increased 0.3 percent to $726.9 million from $724.7 million in 2018. Included within the year-over-year change are the following items:

  • The acquisition of BOFA International LTD (BOFA), which was completed during first quarter 2019, added approximately 1.3 percentage points,
  • Price increases added approximately 0.9 percentage points,
  • Adoption of the revenue recognition accounting standard (revenue recognition) added approximately 0.6 percentage points, and
  • Currency translation reduced sales by approximately 2.0 percent.

  

Three Months Ended

 

Twelve Months Ended

 

July 31, 2019

 

July 31, 2019

 

Reported

% Change

 

Constant

Currency

% Change

 

Reported

% Change

 

Constant

Currency

% Change

Off-Road

(10.1

)

%

 

(8.0

)

%

 

(3.7

)

%

 

(0.8

)

%

On-Road

1.5

 

 

 

2.2

 

 

 

16.6

 

 

 

18.4

 

 

Aftermarket

0.3

 

 

 

2.5

 

 

 

4.2

 

 

 

7.1

 

 

Aerospace and Defense

4.0

 

 

 

5.7

 

 

 

9.8

 

 

 

11.7

 

 

Total Engine Products segment

(1.1

)

%

 

0.9

 

%

 

4.2

 

%

 

6.9

 

%

Industrial Filtration Solutions

6.2

 

%

 

8.8

 

%

 

8.0

 

%

 

11.1

 

%

Gas Turbine Systems

6.9

 

 

 

8.5

 

 

 

(8.0

)

 

 

(6.5

)

 

Special Applications

(8.8

)

 

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