Donaldson Co. suffered another down quarter amid sector downturns across most of its customer base. Second-quarter results announced Tuesday missed Wall Street expectations and caused officials to cut their outlook for the full year.
Global downturns have hit the mining, ag equipment and energy-related sectors, and they are not expected to measurably rebound until next year. Add to that a high U.S. dollar wreaking havoc with currency exchanges, and the Bloomington-based manufacturer saw cuts to profits or exports.
"If you look at all their major customers and all the machine manufacturers, they are all guiding to the entire 2016 year being essentially down," said Matt Arnold, an analyst for Edward Jones Research. "The one thing that helped this company to weather this [economy] pretty well is that they have this big aftermarket business [for diesel truck filters]. And as long as these big diesel machines keep running they will need their filters to be replaced even as demand for new equipment lags."
For the quarter, the maker of filters for construction, factory, airplane, farm and diesel-truck customers saw sales fall 12 percent to $517 million. Earnings fell 21 percent to $38 million, or 28 cents per share. Excluding one-time items, adjusted earnings were 29 cents a share.
Sales and profits both missed expectations. On average, analysts forecast profits of 34 cents a share and revenue of $535 million.
"While market conditions remained stagnant last quarter, we further intensified our focus on operational efficiency and expense management," CEO Tod Carpenter told analysts in a conference call.
Analysts generally acknowledged that the company is doing all it can from a cost-cutting perspective and that its outlook is not as downtrodden as it could be.
Donaldson's stock rose $1.51 per share to close at $29.75 Tuesday.
For full-fiscal 2016, Carpenter said he expects adjusted earnings of $1.51 to $1.61 per share, off from the prior estimate of $1.49 to $1.69. Sales are expected to fall 5 to 7 percent, which is more than the 3 to 7 percent decline previously forecast.
Donaldson's tough times with exchange rates and the industrial downturn are shared by other large manufacturers that recently reported earnings.
Dee DePass • 612-673-7725