Filtration systems provider Donaldson Co., Inc. (DCI) reported Friday a profit for the third quarter that increased 15 percent from last year, reflecting improved margins and revenue growth.
Earnings per share for the quarter topped analysts' expectations by three cents, while quarterly revenues trailed their estimates by a whisker. The company also raised its earnings forecast for the full-year 2012.
Following the announcement, the company's shares are trading up nearly 10 percent in pre-market trade.
"The continued strength in many of our mid-cycle businesses and the beginning of the recovery of our late-cycle Gas Turbine Systems products, combined with ongoing solid execution across our Company, helped us set new quarterly records in sales, operating margin, and EPS," Chairman, President and CEO Bill Cook said in a statement.
The Minneapolis, Minnesota-based company reported net earnings of $70.95 million or $0.46 per share for the third quarter, higher than $61.81 million or $0.39 per share in the prior-year quarter.
On average, ten analysts polled by Thomson Reuters expected the company to earn $0.43 per share for the quarter. Analysts' estimates typically exclude special items.
Net sales for the quarter grew 9 percent to $647.24 million from $594.57 million in the same quarter last year, but missed eight Wall Street analysts' consensus estimate of $649.88 million by a whisker.
The company noted that foreign currency translation negatively impacted net earnings by $0.9 million or 1.5 percent, and sales by $11.6 million or 2.0 percent, during the quarter.
"Led by a 15 percent increase in Gas Turbine Products, sales growth was strong across all three of the product groups within our Industrial Products segment, with overall sales up 11 percent. Sales in our Engine Products segment grew 8 percent as new equipment build rates at our Off-Road and On-Road OEM Customers remained healthy," Cook added.
Gross margin percentage for the quarter improved 10 basis points to 35.3 percent from last year's 35.2 percent, helped by the ongoing continuous improvement initiatives and improved absorption of fixed costs, partially offset by marginally less favorable sales mix.
As a percent of sales, operating expenses also contracted 110 basis points to 20.1 percent from last year's 21.2 percent.
Looking ahead to fiscal 2012, the company raised its earnings guidance to a range of $1.66 to $1.76 per share from the previous guidance of $1.63 to $1.73 per share, after adjusting for the two-for-one stock split executed in March.
The company also now expects full-year sales to grow 9 percent from last year to $2.5 billion, with both engine products as well as industrial products sales increasing 8 to 10 percent. Earlier, the company anticipates sales to grow 7 to 12 percent.
Street is currently looking for full-year 2012 earnings of $1.70 per share on annual revenues of $2.52 billion.
DCI closed Thursday's regular trading session at $32.54, down $1.25 on a volume of 1.0 million shares.
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