Donaldson (NYSE: DCI) reported Q3 EPS of $0.53, $0.01 better than the analyst estimate of $0.52. Revenue for the quarter came in at $700 million versus the consensus estimate of $682.68 million.

“We are pleased to have delivered another quarter of strong sales growth in both segments, reflecting benefits from consistent execution of our strategic priorities combined with favorable market conditions,” said Tod Carpenter, chairman, president and chief executive officer. “Based on incremental strength across our company, particularly in our Engine first-fit and Industrial businesses, and continued momentum in many of our end markets, we now forecast full-year sales to increase about 15 percent and adjusted EPS to be up 17 to 19 percent.

“As we close the year, our strategic agenda is unchanged: invest in our customers, technology innovation, e-commerce and capacity expansion. Additionally, we are addressing the inflationary and demand-related pressures that have been affecting our margin. We made progress last quarter by implementing further cost-cutting initiatives and global price increases, and we view this work as ongoing. Our employees are showing tremendous commitment to enhancing our operating margin while executing our strategic priorities, and I am confident that their efforts position us well to deliver our financial and strategic targets this year and into the future.”

Fiscal 2018 Outlook

Donaldson now expects fiscal 2018 adjusted EPS between $1.97 and $2.01,3 reflecting an increase of 2 cents when comparing the midpoints of the current and prior guidance ranges. Year-to-date charges related to provisional estimates of the impact from the TCJA result in fiscal 2018 GAAP EPS that is approximately $0.83 lower than adjusted EPS.

Donaldson expects full-year 2018 sales will increase about 15 percent, compared with prior forecast of 13 to 15 percent. The forecast includes benefits from currency translation and acquisitions completed in fiscal 2017 of approximately 3 percent and 1 percent, respectively.

Sales of Engine Products are expected to increase between 18 and 19 percent, compared with prior forecast of 17 to 19 percent. The full-year sales forecast reflects growth in On-Road, Off-Road and Aftermarket, partially offset by declining sales in Aerospace and Defense. Industrial Products sales are expected to increase between 8 and 9 percent, compared with prior forecast of 5 to 7 percent. The full-year sales forecast reflects growth in Industrial Filtration Solutions and Special Applications, partially offset by declining sales in Gas Turbine Systems.

Donaldson expects full-year 2018 operating margin between 13.8 and 14.2 percent, interest expense of approximately $21 million and other income of $1 million to $5 million. Excluding one-time charges related to the TCJA, Donaldson’s fiscal 2018 effective income tax rate is projected between 26.7 and 28.7 percent, compared with prior guidance of 26.5 to 28.5 percent. The full-year tax rate includes a partial-year benefit from the U.S. corporate tax rate reduction that is largely offset by foreign withholding tax and other matters related to the TCJA.

The Company expects fiscal 2018 capital expenditures of $100 million to $110 million and cash conversion between 60 and 75 percent, which excludes the impact from the TCJA and the pension contributions made during third quarter 2018. Donaldson plans to repurchase approximately 2 percent of its outstanding shares in fiscal 2018.

GUIDANCE:

Donaldson sees FY2018 EPS of $1.97-$2.01.

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