Donaldson (NYSE: DCI) reported Q4 EPS of $0.50, $0.06 better than the analyst estimate of $0.44. Revenue for the quarter came in at $617.4 million versus the consensus estimate of $614.16 million.

Fiscal 2021 Expectations

Donaldson continues to experience volatility related to the COVID-19 pandemic, and the magnitude and duration of the impact from the pandemic remains uncertain. Consequently, the Company is not issuing detailed guidance for full-year 2021 key performance metrics at this time; however, Donaldson will maintain transparency by outlining important factors that are expected to impact the Company’s full-year 2021 results, including:

• Sales in August 2020, the first month of fiscal 2021, were down sequentially from July, which is typical seasonality, and about 10 percent from the prior year, reflecting an increase in APAC, driven by growth in China, and continued pressure in the Americas.
• Full-year sales trends are expected to vary widely by geography and market, and year-over-year performance of replacement parts and products related to new markets, like food and beverage, should continue to be better than the Company average,
• Sales in the first half of fiscal 2021 will likely experience year-over-year declines, due in large part to the timing of when the pandemic began,
• Gross margin benefits realized in fiscal 2020 from a favorable mix of sales and lower raw material costs are not expected to continue to the same degree in fiscal 2021, while optimization initiatives related to manufacturing, supply chain and procurement are expected to continue benefitting gross margin,
• Operating expense is expected to include a year-over-year increase of approximately $13 million associated with the standard process for resetting the annual incentive plans following a lower level of incentive compensation in the prior year; however, Donaldson is planning to substantially offset this increase with continued expense controls, due in part to pandemic-related restrictions,
• The full-year 2021 effective income tax rate is expected to be in the range of Donaldson’s post-tax reform long-term effective rate estimate of 24 to 27 percent,
• Capital expenditures are planned meaningfully below fiscal 2020 as projects related to capacity expansion, manufacturing and supply chain optimization projects and Donaldson’s new R&D facility are nearing completion,
• Donaldson expects to repurchase at least 1 percent of its outstanding shares in fiscal 2021, consistent with its commitment to offset annual dilution from stock-based compensation, and
• Free cash flow conversion is expected above 100 percent.

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