Disappointed investors stomped down Donaldson's stock Monday as they digested a preliminary warning that setbacks in mining and ag sectors had largely scuttled Donaldson's plans for growth for 2015.
Officials of the Bloomington-based filtration equipment maker told analysts in a conference call Monday that fiscal 2015 revenue will fall 4 to 5 percent largely because of sweeping declines in equipment orders and project stalls in North American agriculture and global mining. The stock closed at $35.74, down $1.96, or 5.2 percent.
Donaldson — which makes filtration systems for factories, mines, heavy trucks, planes, tractors and construction projects — has also seen double-digit declines in China due to construction and factory cutbacks there.
Officials first signaled the latest problems late Friday after the market closed when they reduced their 2015 forecast for the third time in six months. On Monday, company officials answered questions from Wall Street analysts about how long the slowdown should last.
CEO Tod Carpenter said the future of some aspects of the global slowdown remains "cloudy." Equipment orders for the ag sector remain down 35 to 45 percent in North America as companies such as John Deere, Caterpillar and AGCO adjust to the new climate. At the same time, construction equipment growth for all countries has slowed to a positive 1 to 2 percent.
"But the big change for us is really in the mining sector," Carpenter said. "There's a new step down that mining seems to be taking. … We talked to our mining customers and we have taken the guidance that they given us and baked it into our new guidance."
Mining firms around the world have recently cut production as demand in China has slowed and as U.S. iron and steel and coal producers are responding to low prices and slumping orders. In recent weeks, American behemoths such as U.S. Steel, AK Steel, Cliffs Natural Resources, Magnetation LLC and Nucor Corp. have seen profits plummet and tightened their belts.
In Minnesota, three iron ore plants have or will idle production, resulting in the layoff of 1,100 workers.
Donaldson has had layoffs of its own. The company cut roughly 1 percent of its 12,500 global workforce in April. Fewer than 50 of the workers affected are in Donaldson's Bloomington headquarters, said spokesman Brad Pogalz.
Donaldson will release actual third-quarter results on May 21.
In a preliminary statement, however, Donaldson said it now expects full 2015 sales to drop 4 to 5 percent to between $2.3 billion and $2.4 billion. That's down from February's forecast of $2.4 billion to $2.5 billion. Adjusted 2015 earnings are expected to be $1.51 to $1.61 per share, excluding $10 million in restructuring charges and $4 million in pension costs. The prior guidance was $1.65 to $1.85 per share.