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Donaldson Q2 Results Miss Estimates; Lowers Full-year Outlook

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Filtration systems provider Donaldson Co. Inc. (DCI: Quote) on Monday reported a 6 percent decline in profit for the second quarter as lower margins and higher costs more than offset an increase in revenues. Both revenue and earnings per share for the quarter missed analysts' estimates. Looking ahead, the company lowered its financial outlook for fiscal 2013.

Minneapolis, Minnesota-based Donaldson's gross margin for the second quarter slid to 33.4 percent from 34.6 percent in the year-ago period, primarily attributable to lower fixed cost absorption due to the decrease in the company's production volumes and the mix impact due to large gas turbine project shipments.

Operating margin decreased 100 basis points from last year to 11.9 percent due to lower fixed cost absorption in the engine products segment and the mix shift to large gas turbine project shipments.

The engine products segment recorded a 5 percent decline in sales for the quarter to $353.84 million, amid lower sales across all product categories - offroad, onroad, aftermarket products, retrofit emissions products, and aerospace and defense products.

Industrial Products segment's sales for the quarter rose 15 percent from the year-ago period to $242.20 million, reflecting a 79 percent surge in sales of gas turbine products.

Bill Cook, CEO of Donaldson said, "Our Gas Turbine Products' sales increased 79 percent as we shipped a number of large project shipments to our Customers this quarter. This offset weaker sales into the North American On-Road truck market, the On-Road and Off-Road equipment markets in Asia, and for On-Road and Off-Road replacement filters in Europe."

Donaldson's net earnings for the second quarter were $50.81 million or $0.34 per share, down from $53.82 million or $0.35 per share in the year-ago period. On average, eleven analysts polled by Thomson Reuters expected earnings of $0.38 per share for the quarter. Analysts' estimates typically exclude special items.

Net sales for the quarter rose 3 percent to $596.04 million from $580.88 million in the year-ago period, but missed analysts' consensus revenue estimate of $605.26 million.

Looking ahead to fiscal 2013, Donaldson now forecasts earnings in a range of $1.61 to $1.81 per share and sale to be approximately equal to last year's $2.5 billion. Earlier, the company forecast earnings for the year between $1.68 and $1.88 per share and sales increase of 0 to 4 percent at $2.5 billion to $2.6 billion.

Analysts expect the company to report earnings of $1.76 per share for the year on revenues of $2.55 billion.

Cook said, "Based on input from key Customers, we see current market conditions continuing in the near term due primarily to the ongoing high levels of global economic uncertainty. Fortunately, we anticipate strength in our Gas Turbine business for the balance of our fiscal year, which will help offset some of the weakness in our other businesses."

DCI closed Friday's trading at $36.45, down $0.23 on a volume of 727,000 shares.

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by RTT Staff Writer

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