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On Tuesday, Morgan Stanley (NYSE:MS) analysts reaffirmed their Underweight rating and maintained a $65.00 price target for Donaldson Company stock (NYSE: NYSE:DCI), which currently trades at a P/E ratio of 20.4x. According to InvestingPro analysis, the stock is trading near its Fair Value, with a high P/E ratio relative to its near-term earnings growth potential.
Donaldson reported fiscal third-quarter earnings per share (EPS) of $0.99, surpassing both Morgan Stanley’s estimate and the consensus of $0.95. The company’s performance was characterized by weaker pre-tax income in the Mobile Solutions and Industrial Solutions segments, which was offset by stronger results in Life Sciences and Corporate sectors. InvestingPro data shows the company maintains strong financial health with a gross profit margin of 35.7% and robust return on equity of 29%.
Despite the EPS beat, concerns were raised about a $62 million impairment charge related to certain intangible assets in the Life Sciences segment. This charge could impact future growth prospects for the segment, despite its improved profitability in the quarter.
Donaldson adjusted its free cash flow conversion forecast for the fiscal year to a range of 80-90%, down from the previous 85-95%. This adjustment comes despite a $10 million reduction in capital expenditure outlook and an increased EPS guidance. The company also announced an accelerated stock repurchase plan, aiming to buy back 3.5%-4.0% of its outstanding shares, up from the previous 2%-3%, and raised its dividend per share by 11% year-over-year. Notably, InvestingPro highlights that Donaldson has maintained dividend payments for 55 consecutive years and raised them for 29 straight years, demonstrating exceptional dividend reliability.
Investors are expected to focus on management’s commentary regarding trends in key end-markets and strategies to mitigate geopolitical and tariff challenges.
In other recent news, Donaldson Company, Inc. announced impressive third-quarter earnings and revenue results, surpassing analyst expectations. The company reported adjusted earnings per share of $0.99, exceeding the anticipated $0.95. Revenue increased by 1.3% year-over-year to $940.1 million, also beating the forecasted $936.84 million. Donaldson’s growth was driven by a strong performance in its replacement parts business, with aftermarket sales in the Mobile Solutions segment rising by 3.3% and Aerospace and Defense sales surging by 27.1%. In light of these results, Donaldson has raised its full-year adjusted earnings per share guidance to a range of $3.64 to $3.70, above the previous outlook of $3.57 to $3.67. The company continues to expect full-year sales growth between 1% and 3%. Despite these positive developments, Donaldson shares experienced a slight dip in premarket trading.
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