Donaldson Clocks ~12% Revenue Growth In Q3, Raises FY22 Sales Guidance

Donaldson Company, Inc. DCI reported third-quarter FY22 sales growth of 11.5% year-over-year to $853.2 million, beating the consensus of $823.99 million.
Adjusted EPS was $0.67, below the consensus of $0.72.
The gross margin contracted by 220 bps to 31.5%, reflecting continued headwinds from raw materials, freight, energy, and labor costs.
Engine Products segment sales increased 13.2% Y/Y, as solid sales in Aerospace and Defense, Aftermarket, and Off-Road were partially offset by a decrease in On-Road.
Industrial Products segment sales rose 7.8% Y/Y, led by Gas Turbine Systems and Industrial Filtration Solutions.
The operating income increased by 1.5% Y/Y to $111 million, and the margin contracted 130 bps to 13%.
Donaldson generated cash from operating activities YTD of $143.9 million, compared to $305.6 million a year ago. Free cash flow was $87.1 million.
Adjusted EBITDA margin declined by 178 bps to 16.2%.
FY22 Outlook: Donaldson increased its net sales outlook to 14.5% - 16.5% over the prior year (previous guidance 11% - 15%). It sees GAAP EPS of $2.67 - $2.73, (previous range $2.66 - $2.76) vs. consensus of $2.70.
DCI expects gross margin to be down 1.5% to 2% (prior view down 1.0% to 1.5%). It sees an operating margin of 13.5% - 13.9% compared with previous guidance of 14.0% - 14.4%.
Price Action: DCI shares traded lower by 2.68% at $50.88 on the last check Wednesday.

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