DCI: Donaldson Company Inc Stock Analysis

Donaldson Company Inc manufactures and sells filtration system and replacement parts
worldwide. DCI operates through two segments- Engine Products and Industrial Products.
Engine Products segment offers air filtration and liquid filtration systems as well as exhaust and
emission systems and replacement filters. Products are sold to original equipment manufacturers
in construction, mining, agriculture as well as aerospace, defence truck markets. For independent
distributors, OEM dealer networks, private label accounts as well as large equipment fills, DCI
was founded in 1915 is linked to Minneapolis, Minnesota.
Analysis
DCI stock gained 7.33 percent to US $35.72 on heavy trading volume after the company's
financial results topped estimates for 2016 Q3. Minneapolis based filtration services firm DCI
reported earnings of 43 cents per share on revenue of US $571.3 million for the quarter closing
April 30, and analysts were expected to have earnings of 39 cents per share on revenue of US
$550.8 million.
Revenue fell by 0.7 percent Y-O-Y as a 3.1 percent increase in industrial product sales offset a
2.9 decline in engine product sales while revenue was up 0.2 percent on a constant currency
basis. During this quarter, the company delivered strong expense and opportunities to lower cost
through additional restructuring. Broad based reductions will generate annual savings of US $8
million.
The company has gained robust industrial efficiency and total sales of US $571.3 million down
0.7 percent on a Y-O-Y basis. Poor performance of the Engine Products segment also impacted
top line performance. Donaldson's adjusted operating margin increased 120 basis points over to
13.8 percent, and the EBITDA came to US $96.7 million versus US $89.8 million recorded a
year back.
Donaldson exited the quarter with cash and equivalents of US $247.4 million as against 189.9
million on July 31, 2015. Company has a long term debt of US $391.8 million on April 30, 2016
as against 389.2 million on July 31, 2015.
Conclusion
While the weakness of the company is apparent, its strengths are less apparent. Consider
aftermarket growth, continued geographic expansion and fostering of innovative technology to
ensure first fit program deals to combat the weaknesses. The company's restructuring initiatives

for aligning and manufacturing cost structure with current and projected customer outlook
looking encouraging and the growing presence in the Latin American market.
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