Filtration equipment manufacturer Donaldson (DCI 43.58, -2.99 -6.4%) trades to about six-month lows this afternoon in reaction to the mixed Q4 report.
As mentioned, DCI is a filtration equipment company. Namely, DCI’s solutions are used in applications for commercial/industrial, aerospace, chemical and alternative energy. Everything from helicopters to windmills are likely to have a DCI filter. The Bloomington, Minnesota company first offered its shares to the public back in 1972, shares of DCI have been split eight times on the markets and currently carries YTD gains of just 2.6% after today's losses.
Getting back to the results, DCI reported Q4 earnings of $0.51 per share on revenues which rose about 11.2% compared to last year to about $660.1 million. GAAP gross margins were 34.8%, negatively impacted by an unfavorable sales mix of products, higher raw materials costs and incremental freight charges. The company noted that these pressures were partially offset by improved absorption of fixed costs on increasing volume.
Taking a quick look at DCI’s FY18 guidance, the company sees in-line GAAP earnings of $1.79-1.93 and expects FY18 sales to be up 4-8% from 2017, including about 2% related to a favorable impact from currency translation and benefits from the acquisitions completed during fiscal 2017. Further, DCI sees FY18 operating margins between 14.0-14.4% on $80-100 million in capital expenditures.
Sales of Engine Products are expected to increase 6-10% from 2017, reflecting growing sales of Aftermarket, Off-Road and On-Road, partially offset by declining sales of Aerospace and Defense. Fiscal 2018 Industrial Products segment sales are expected to be in the range between flat and up 4% from the prior year, reflecting growth in Industrial Filtration Solutions, flat sales of Special Applications and declining sales of Gas Turbine Systems.
At this point, DCI trades about 23x its FY18 earnings outlook as today’s wide trading range mirrors the early-June post-Q3 trading channel.