Donaldson Beats Q1 Estimates, Notes Margin Pressure

Donaldson Company, Inc. DCI reported first-quarter FY22 sales growth of 19.5% year-over-year to $760.9 million, beating the consensus of $745.38 million.

• Engine Products segment sales increased 20.9% Y/Y to $527.2 million and Industrial Products segment's +16.6% Y/Y to $233.7 million.
• EPS improved to $0.61 from $0.48 in 1Q21, beating the consensus of $0.55.
• The gross margin contracted by 120 bps to 33.8%, reflecting higher raw materials, labor, and freight costs.
• The operating income increased by 23.2% Y/Y to $107.5 million, and the margin expanded by 40 bps to 14.1%.
• Donaldson generated cash from operating activities of $42.9 million, compared to $128.9 million a year ago. Free cash flow of $24.6 million.
• EBITDA was $131.3 million compared to $109 million in 1Q21, and the margin expanded by 13 bps to 17.3%.
• FY22 Outlook: Donaldson increased its net sales outlook to 8% -12% growth Y/Y (prior guidance 5% - 10%). It sees GAAP EPS of $2.57 - $2.73 (prior view $2.50 - $2.66).
• "Based on our strong first quarter results and sales momentum in both segments, we are raising our fiscal 2022 sales and earnings outlook; however, the macro-economic headwinds are creating a different path to achieving our results than we previously anticipated," said Tod Carpenter, chairman, president, and CEO.
• Price Action: DCI shares closed lower by 4.29% at $56.43 on Tuesday.