Leading air-filter maker faces headwinds from strong dollar

By Siri Bulusu

Donaldson Company, Inc. reported softer than expected second quarter earnings Tuesday, citing “stagnant” marketplace conditions and pressure from the strong U.S. dollar.

For the quarter ending Jan. 31, the air-filtration company’s net income fell to $38.0 million, or 28 cents per diluted share, from $48.0 million, or 34 cents per diluted share, in the year ago quarter.

Excluding unusual items, Donaldson said, adjusted earnings slipped to 29 cents per diluted share, down from 36 cents a year ago, and 5 cents lower than the 34 cents a share Wall Street analysts surveyed by Yahoo Finance were expecting.

Net revenue in the second quarter was $517.2 million, down 12.1 percent from $588.5 million in the year ago quarter.

Donaldson is a global manufacturer of air filtration systems, exhaust and emissions systems liquid filtration systems for engine and industrial markets, and its fortunes tend to track the health of the manufacturing sector.

Donaldson share prices September 2015 – March 2016

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Donaldson share prices were not shaken by Tuesday’s second quarter earnings release. (Data from Yahoo Finance)

The Minnesota-based company stated in a press release that “impact from foreign currency translation” reduced its net income by $4.9 million, or 10.2 percent.

“We expect these pressures to continue into the second half of this fiscal year, so we have revised our full-year sales and profit guidance,” said Tod Carpenter, president and CEO of Donaldson in a press release.

Donaldson tightened its adjusted earnings-per-share 2016 expectation to $1.51 and $1.61, from a prior guidance range of $1.49 and $1.69, maintaining the midpoint of their guidance, but reducing its high end by 8 cents.

The year-to-date net revenue for the period ending Jan. 31 was $1.06 billion, a 10.9 percent drop from $1.19 billion for the similar year-ago period.

Net income for the year-to-date period was $76.5 million, or 57 cents per diluted share, a 26.4 percent drop from $103.9 million, 74 cents a share, for the year-ago period.

Despite the downbeat profit performance, in New York Stock Exchange trading Tuesday Donaldson shares jumped $1.51, or 5.4 percent, to close at $29.75.

Photo at top: Donaldson is a worldwide producer of air filters for engine and industrial markets. (Praveer Sharma/ FLICKR)