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Donaldson Company Inc (NYSE:DCI) reported record fourth quarter and full-year earnings for fiscal 2025, with growth across all business segments, according to the company’s presentation slides released on August 27, 2025. The filtration solutions provider saw its stock rise 3.13% in pre-market trading to $78.00, approaching its 52-week high of $78.95.
Quarterly Performance Highlights
Donaldson delivered strong fourth-quarter results, with sales reaching $981 million, a 5% increase year-over-year (3% on a constant currency basis). The company reported adjusted earnings per share of $1.03, up 10% compared to the same period last year, while adjusted operating margin increased by 10 basis points to 16.4%.
"Donaldson Company is in a position of strength," CEO Todd Carpenter had stated during the company’s third-quarter earnings call, a sentiment reinforced by these fourth-quarter results showing the company’s seventh consecutive quarter where earnings growth outpaced sales growth.
As shown in the following quarterly performance overview:
The company’s performance was driven by volume growth of 2%, favorable currency translation of 2%, and pricing contributions of 1%. However, adjusted gross margin decreased by 140 basis points year-over-year, which was offset by disciplined expense management that reduced adjusted operating expenses as a percentage of sales by 160 basis points.
Full-Year Performance
For the full fiscal year 2025, Donaldson reported sales of $3.69 billion, representing a 3% increase on a constant currency basis compared to fiscal 2024. Adjusted operating margin improved by 30 basis points to 15.7%, while adjusted diluted EPS grew 8% to $3.68, in line with the company’s previously provided guidance range of $3.64 to $3.70.
The full-year performance is illustrated in the following chart:
Volume growth contributed 2% to the annual sales increase, with pricing adding another 1%. The company saw year-over-year growth across all segments, with Life Sciences leading at 10%, followed by Industrial Solutions at 4% and Mobile Solutions at 2%.
Segment Performance Analysis
All three of Donaldson’s business segments showed growth in the fourth quarter, with particularly strong performance in Life Sciences and Industrial Solutions.
The Mobile Solutions segment, which accounts for the largest portion of Donaldson’s business, reported a 2% sales increase (1% on a constant currency basis), driven by aftermarket and off-road sales. The segment’s earnings before tax margin improved by 80 basis points to 19.1% of sales, benefiting from inventory valuation adjustments and leverage on higher sales.
Industrial Solutions delivered the strongest performance among the established segments, with sales growing 8% (6% on a constant currency basis). This growth was primarily driven by new equipment demand in dust collection in Europe and the United States, as well as favorable project timing in Power Generation. The segment’s earnings before tax margin expanded by 80 basis points to 20.9%.
The Life Sciences segment, which represents Donaldson’s strategic growth area, showed impressive results with a 14% sales increase (9% on a constant currency basis). The segment’s performance was boosted by strong new equipment and replacement part sales in Food and Beverage, as well as strength in Disk Drive. Most notably, the segment’s earnings before tax margin improved dramatically by 650 basis points to 5.3% of sales.
As shown in the Life Sciences segment results:
Cash Flow and Shareholder Returns
Donaldson demonstrated strong cash generation capabilities in the fourth quarter, with adjusted free cash flow conversion of 123%. For the full year, the company reported free cash flow of $342 million, compared to $408 million in fiscal 2024.
The company continued its commitment to shareholder returns, distributing $95 million to shareholders in the fourth quarter through dividends ($35 million) and share repurchases ($60 million). For the full fiscal year 2025, Donaldson returned a total of $465 million to shareholders, consisting of $132 million in dividends and $332 million in share repurchases.
The following chart illustrates Donaldson’s balance sheet and cash flow metrics:
Net debt increased to $488 million at the end of fiscal 2025, up from $304 million at the end of fiscal 2024, reflecting the company’s increased share repurchase activity during the year.
FY26 Guidance and Outlook
Looking ahead to fiscal 2026, Donaldson provided a positive outlook, projecting sales growth of 1% to 5%, centered around $3.8 billion. The company expects operating margin to range between 16.1% and 16.7%, driven by gross margin expansion and leverage on higher sales.
Donaldson forecasts diluted EPS of $3.92 to $4.08 for fiscal 2026, representing potential growth of up to 11% compared to fiscal 2025. Capital expenditures are expected to be between $65 million and $85 million, with free cash flow conversion projected at 85% to 95%.
The company’s fiscal 2026 outlook is summarized in the following slide:
By segment, Donaldson expects Mobile Solutions sales to grow 0% to 4%, Industrial Solutions sales to increase 2% to 6%, and Life Sciences sales to grow in the low-single digits.
"We are strategic and disciplined with our focus remaining more squarely on opportunities within the life sciences and industrial markets," CFO Brad Poggles had noted during the previous earnings call, highlighting the company’s strategic direction.
Donaldson continues to position itself as a leader in filtration with a focus on helping customers meet evolving environmental and operational goals. The company’s key investment points emphasize its technological leadership and balanced growth strategy:
With its stock trading near 52-week highs and a consistent record of earnings growth, Donaldson appears well-positioned to continue its momentum into fiscal 2026, despite ongoing challenges in gross margins and varying growth rates across its business segments.
Full presentation:
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