Donaldson (NYSE: DCI) reported Q2 EPS of $0.52, $0.01 better than the analyst estimate of $0.51. Revenue for the quarter came in at $679.1 million versus the consensus estimate of $653.96 million.

GUIDANCE:

Donaldson sees FY2021 EPS of $2.17-$2.25, versus the consensus of $2.13.

• Donaldson expects fiscal 2021 GAAP EPS between $2.09 and $2.17, including a negative impact of $0.08 per share related to restructuring activities in the second quarter, compared with 2020 GAAP EPS of $2.00. Adjusted fiscal 2021 EPS is expected between $2.17 and $2.25. Total Company sales are expected to increase between 5% and 8% compared to 2020. Currency translation is expected to benefit sales by 3%.
• Fiscal 2021 Engine sales are projected to increase between 8% and 12% versus 2020, reflecting continuing growth in Off-Road and Aftermarket and strong second half growth in On-Road combined with lower year-over-year sales in the Company’s Aerospace and Defense businesses. Industrial sales are expected to be down 2% to up 2% from 2020, reflecting second half growth in IFS led by Industrial Air Filtration and Process Filtration, and modest growth in Gas Turbine Systems partially offset by declining sales in Special Applications primarily driven by expected declines in disk drive filters.
• Donaldson expects fiscal 2021 adjusted operating margin in the range of 13.8% and 14.2%, versus 13.2% in 2020. The year-over-year improvement is projected to come from higher gross margin, reflecting improved absorption and operating expense leverage. The improvement was partially offset by higher raw material costs, mix pressures, and increased incentive compensation expense. The adjusted operating margin forecast excludes the impact of the restructuring charges recorded in the second quarter of 2021.
• The Company expects fiscal 2021 interest expense of approximately $13 million, and other income is forecast between $2 million and $4 million. Donaldson’s 2021 effective income tax rate is forecast between 24% and 25%.
• The Company expects fiscal 2021 capital expenditures between $55 million and $65 million. Cash flow conversion is still expected above 100%, reflecting strong year-to-date conversion and anticipated increases in working capital later in the fiscal year. Donaldson expects to repurchase 1% to 2% of its outstanding shares during fiscal 2021.

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