Donaldson Q3: Earnings Beat, Tightened FY23 Outlook & More

Donaldson Co Inc DCI reported a Q3 FY23 sales increase of 2.6% Y/Y to $875.7 million beating the consensus of $868.4 million.
By segment, sales increased 13.8% Y/Y in the Industrial Solutions while declining 12.6% Y/Y in Life Sciences and were flattish Y/Y in the Mobile Solutions segment.
EPS stood at $0.76, up from $0.67 a year ago, exceeding the consensus of $0.74.
Gross margin expanded 150 basis points to 33.0% on solid pricing.
Operating margin improved by 120 basis points Y/Y to 14.2%.
Year-to-date, Donaldson has paid $84.1 million in dividends and repurchased shares worth $119.3 million.
Last week, the Board of Directors raised the dividend per share by 8.7% to $0.25, payable on June 23, 2023, to shareholders of record as on June 7, 2023.
FY23 Outlook Revised: The company now expects adjusted EPS to be $3.00-$3.06 (vs $2.99-$3.07 previously) compared to the consensus of $3.04.
DCI now projects sales increase of 3%-5% Y/Y (vs. 2%-6% earlier), with about 8% expected growth in pricing and unfavorable foreign currency translation of around 4%.
The company now anticipates an adjusted operating margin of 14.4%-14.8% vs. 14.6%-15.0% expected earlier.
DCI continues to project capital expenditures of $115 million-$130 million and share repurchases of around 2% of its outstanding shares.
Last month, the company disclosed FY26 financial targets, expecting sales of $3.8 billion to $4.3 billion (+4% to +8% 3-year CAGR from FY23 guidance mid-point), operating margin of 15.6% to 16.4% and incremental margin of within 20% to 24% over FY23-FY26 period.
Price Action: DCI shares traded lower by 1.58% at $63.08 on the last check Wednesday.
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