Donaldson Q4 Profit Declines, But Results Beat View

(RTTNews) - Filtration systems maker Donaldson Company, Inc. (DCI) on Tuesday reported a 23 percent decline in profit for the fourth quarter from last year, reflecting restructuring and impairment charges as well as lower sales.

However, both revenue and adjusted earnings per share for the quarter beat analysts' estimates. The company also forecast fiscal 2016 financial results in line with Street expectations.

Tod Carpenter, President and CEO of Donaldson said, "Our fourth quarter performance exceeded our guidance, driven by better-than-expected sales combined with expense discipline across our Company. Although some of our end markets became increasingly challenged and uncertain as the fiscal year progressed, we delivered local-currency sales growth of over 1 percent for the year."

The Minneapolis, Minnesota-based company's fourth-quarter net earnings were $56.26 million or $0.41 per share, down from $72.96 million or $0.50 per share in the same period last year.

In the latest quarter, the company recorded pre-tax restructuring and impairment charges of $7.1 million, while foreign currency translation negatively impacted earnings by $5.4 million.

Excluding items, adjusted earnings for the quarter were $0.45 per share, compared to $0.50 per share in the year-ago period. On average, ten analysts polled by Thomson Reuters expected the company to report earnings of $0.42 per share for the quarter. Analysts' estimates typically exclude special items.

Net sales for the quarter decreased 9 percent to $609.75 million from $668.23 million in the year-ago period. Foreign currency translation reduced sales for the quarter by 7.8 percent. Analysts had a consensus revenue estimate of $595.78 million for the quarter.

Engine segment net sales declined 13 percent from last year to $368.26 million, while industrial segment sales decreased 1.5 percent to $241.49 million.

Excluding the impact of currency translation, total sales decreased 1.1 percent in fourth quarter, reflecting a 5.7 percent decline in Engine Products. This was partially offset by an increase of 6.9 percent in Industrial Products.

Gross margin decreased 2.6 percentage points from the year-ago period to 33.1 percent, driven primarily by lower fixed-cost absorption and the mix of sales.

Operating margin for the quarter was 12.8 percent, which includes a negative impact from restructuring and impairment charges of 1.2 percentage points. Excluding this impact, adjusted operating margin was 14.0 percent in the quarter, compared with 14.9 percent last year.

Looking ahead to fiscal 2016, Donaldson forecast reported earnings in a range of $1.56 to $1.76 per share and sales in a range of $2.32 billion to $2.42 billion, representing a decline of 2 percent to an increase of 2 percent from fiscal 2015. In local currency, sales are expected to increase 2 percent to 6 percent.

Donaldson currently forecasts full-year reported earnings per share will be about $0.01 lower than adjusted earnings.

Analysts expect the company to report earnings of $1.73 per share for the year on revenues of $2.40 billion.

DCI is trading at $31.75, up $0.44 or 1.41 percent on a volume of 153,040 shares.