Company Reports

Narrow-moat Donaldson reported mixed fourth-quarter results, as solid financial performance was overshadowed by updated guidance for fiscal 2026. Management lowered its growth and profitability expectations for the life sciences segment. Shares closed down 3.5%, though we believe the market overlooked improved profitability expectations in the other two segments. As a result, we have slightly increased our fair value estimate by $1 to $68 per share.

Donaldson, a leading manufacturer of air and liquid filtration systems, has built a narrow moat around its large installed base of equipment coupled with a razor-and-blade business model that continues to generate a relatively steady and high-margin stream of recurring revenue from aftermarket parts and consumables. The firm generates an increasing portion of its sales from proprietary solutions, which enjoy higher margins and greater customer retention rates. As a result, recurring revenue has steadily increased, from roughly 50% in 2012 to 65% in fiscal 2022. We expect this trend to continue, as the firm continues to scale their new life sciences segment both through organic investment and acquisitions.

Donaldson, a leading manufacturer of air and liquid filtration systems, has built a narrow moat around its large installed base of equipment coupled with a razor-and-blade business model that continues to generate a relatively steady and high-margin stream of recurring revenue from aftermarket parts and consumables. The firm generates an increasing portion of its sales from proprietary solutions, which enjoy higher margins and greater customer retention rates. As a result, recurring revenue has steadily increased, from roughly 50% in 2012 to over 60% in fiscal 2022. We expect this trend to continue, as the firm continues to scale their new life sciences segment both through organic investment and acquisitions.

Narrow-moat-rated Donaldson reported impressive fiscal third-quarter results as the company achieved record quarterly sales and earnings, which drove the share price to a new all-time high. We've increased our fair value estimate by one dollar to $67 due to the time value of money as the company continues to achieve results consistent with our expectations.

Narrow-moat Donaldson reported solid fiscal second quarter results in which sales and EPS increased 5.7% and 15.7%, respectively, year over year. We increase our fair value by one dollar to $66 due to time value of money as we believe Donaldson will continue to execute in line with our expectations.

Donaldson, a leading manufacturer of air and liquid filtration systems, has built a narrow moat around its large installed base of equipment coupled with a razor-and-blade business model that continues to generate a relatively steady and high-margin stream of recurring revenue from aftermarket parts and consumables. The firm generates an increasing portion of its sales from proprietary solutions, which enjoy higher margins and greater customer retention rates. As a result, recurring revenue has steadily increased, from roughly 50% in 2012 to over 60% in fiscal 2022. We expect this trend to continue, as the firm continues to scale their new life sciences segment both through organic investment and acquisitions.

Narrow-moat-rated Donaldson reported flat sales and EPS growth, after adjusting for restructuring charges, in its fiscal first quarter of 2024. While nothing in the earnings release has altered our long-term view of the business, we've raised our fair value estimate to $65 from $63 due to time value of money.

Donaldson, a leading manufacturer of air and liquid filtration systems, has built a narrow moat around its large installed base of equipment coupled with a razor-and-blade business model that continues to generate a relatively steady and high-margin stream of recurring revenue from aftermarket parts and consumables. The firm generates an increasing portion of its sales from proprietary solutions, which enjoy higher margins and greater customer retention rates. As a result, recurring revenue has steadily increased, from roughly 50% in 2012 to over 60% in fiscal 2022. We expect this trend to continue, as the firm continues to scale their new life sciences segment both through organic investment and acquisitions.

Narrow-moat-rated Donaldson reported full-year fiscal 2023 earnings slightly below our expectations as ongoing softness in the disk drive market affected growth. Nonetheless, the company still generated full-year sales and earnings per share growth of 4% and 9%, respectively, as Donaldson benefited from strength in other end markets as well as favorable pricing and input cost stabilization. As a result, we are raising our fair value estimate to $63 from $59 due to accelerating revenue growth as well as the time value of money.

Donaldson, a leading manufacturer of air and liquid filtration systems, has built a narrow moat around its large installed base of equipment coupled with a razor-and-blade business model that continues to generate a relatively steady and high-margin stream of recurring revenue from aftermarket parts and consumables. The firm generates an increasing portion of its sales from proprietary solutions, which enjoy higher margins and greater customer retention rates. As a result, recurring revenue has steadily increased, from roughly 50% in 2012 to over 60% in fiscal 2022. We expect this trend to continue, as the firm continues to scale their new life sciences segment both through organic investment and acquisitions.

Narrow-moat-rated Donaldson posted a 13.4% year-over-year increase in adjusted EPS, from $0.67 to $0.76, in its fiscal third quarter. We’ve maintained our $59 fair value estimate as nothing in the earnings results materially alters our long-term thesis. We view the name as fairly valued at current levels.

Donaldson, a leading manufacturer of air and liquid filtration systems, has built a narrow moat around its large installed base of equipment coupled with a razor-and-blade business model that continues to generate a relatively steady and high-margin stream of recurring revenue from aftermarket parts and consumables. The firm generates an increasing portion of its sales from proprietary solutions, which enjoy higher margins and greater customer retention rates. As a result, recurring revenue has steadily increased, from roughly 50% in 2012 to over 60% in fiscal 2021. We expect this trend to continue, as the firm is ramping up its research and development spending from 2%-3% to 3%-4%.

Narrow-moat Donaldson posted 3% sales growth year over year, despite currency headwinds of 4%, and achieved the highest quarterly operating margin in six years. Favorable pricing and input cost stabilization allowed adjusted operating margin to expand 330 basis points year over year. We reiterate our $59 fair value estimate as our long-term outlook for Donaldson is unchanged.

Donaldson, a leading manufacturer of air and liquid filtration systems, has built a narrow moat around its large installed base of equipment coupled with a razor-and-blade business model that continues to generate a relatively steady and high-margin stream of recurring revenue from aftermarket parts and consumables. The firm generates an increasing portion of its sales from proprietary solutions, which enjoy higher margins and greater customer retention rates. As a result, recurring revenue has steadily increased, from roughly 50% in 2012 to over 60% in fiscal 2021. We expect this trend to continue, as the firm is ramping up its research and development spending from 2%-3% to 3%-4% and management has prioritized investments in connectivity solutions to complement the company’s large installed base of equipment. We view this strategy favorably and expect that offering customers a comprehensive solution will help reinforce customer switching costs.

Donaldson, a leading manufacturer of air and liquid filtration systems, has built a narrow moat around its large installed base of equipment coupled with a razor-and-blade business model that continues to generate a relatively steady and high-margin stream of recurring revenue from aftermarket parts and consumables. The firm generates an increasing portion of its sales from proprietary solutions, which enjoy higher margins and greater customer retention rates. As a result, recurring revenue has steadily increased, from roughly 50% in 2012 to over 60% in fiscal 2021. We expect this trend to continue, as the firm is ramping up its research and development spending from 2%-3% to 3%-4% and management has prioritized investments in connectivity solutions to complement the company’s large installed base of equipment. We view this strategy favorably and expect that offering customers a comprehensive solution will help reinforce customer switching costs.

Narrow-moat Donaldson posted solid fiscal 2023 first-quarter results, featuring a 22.9% year-over-year increase in adjusted EPS, from $0.61 to $0.75. We’ve maintained our $59 fair value estimate as nothing in the earnings results alters our long-term thesis. We view the name as fairly valued at current levels.

We have maintained our $59 fair value estimate for narrow-moat-rated Donaldson as nothing in its fiscal fourth-quarter earnings release materially alters our long-term outlook for the firm. Despite supply-chain constraints and cost inflation, Donaldson grew its fiscal fourth-quarter adjusted EPS 27% year over year, to $0.84 from $0.66. We’ve rolled our model forward one year, but time value of money was offset by our slightly more muted near-term revenue growth projections, mostly due to foreign currency headwinds.

Donaldson, a leading manufacturer of air and liquid filtration systems, has built a narrow moat around its large installed base of equipment coupled with a razor-and-blade business model that continues to generate a relatively steady and high-margin stream of recurring revenue from aftermarket parts and consumables. The firm generates an increasing portion of its sales from proprietary solutions, which enjoy higher margins and greater customer retention rates. As a result, recurring revenue has steadily increased, from roughly 50% in 2012 to over 60% in fiscal 2021. We expect this trend to continue, as the firm is ramping up its research and development spending from 2%-3% to 3%-4% and management has prioritized investments in connectivity solutions to complement the company’s large installed base of equipment. We view this strategy favorably and expect that offering customers a comprehensive solution will help reinforce customer switching costs.

We are maintaining our $59 fair value estimate for narrow-moat-rated Donaldson following the firm’s fiscal third-quarter earnings release. We’ve made some puts and takes in our model, but time value of money offset our slightly more muted near-term operating margin assumptions due to the ongoing supply chain disruptions and cost inflation. We see the name as modestly undervalued at current levels, with shares trading in 4-star territory.

Donaldson, a leading manufacturer of air and liquid filtration systems, has built a narrow moat around its large installed base of equipment coupled with a razor-and-blade business model that continues to generate a relatively steady and high-margin stream of recurring revenue from aftermarket parts and consumables. The firm generates an increasing portion of its sales from proprietary solutions, which enjoy higher margins and greater customer retention rates. As a result, recurring revenue has steadily increased, from roughly 50% in 2012 to over 60% in fiscal 2021. We expect this trend to continue, as the firm is ramping up its research and development spending from 2%-3% to 3%-4% and management has prioritized investments in connectivity solutions to complement the company’s large installed base of equipment. We view this strategy favorably and expect that offering customers a comprehensive solution will help reinforce customer switching costs.