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Jan 31, 2023
Donaldson Q2 2023 Earnings Report
Donaldson's Q2 2023 sales and earnings reached record levels.
Key Takeaways
Donaldson reported a 3.2% increase in sales to $828.3 million and a GAAP EPS of $0.70, up 22.0% compared to the previous year. The company's robust performance was driven by significant gross margin strength through pricing and the stabilization of inflationary pressures.
Second quarter sales increased 3.2% year over year to $828.3 million, a quarterly record.
GAAP operating margin was 14.0%, while adjusted operating margin was 15.2%.
GAAP EPS increased to $0.70, up 22.0% and adjusted EPS was $0.75, up 32.0% versus 2022.
Donaldson has tightened its fiscal 2023 EPS guidance to the high end of the previous range.
Donaldson
Donaldson
Forward Guidance
Fiscal 2023 full-year GAAP EPS is expected to be between $2.89 and $2.97, inclusive of $0.10 of first half restructuring and other charges. Adjusted EPS is forecast between $2.99 and $3.07. Sales are projected to increase between 2% to 6% over prior year, driven by a 6% increase in pricing and a negative impact from currency translation of approximately 4%.
Positive Outlook
- Mobile sales are projected to increase between 1% and 5% compared with 2022.
- On-Road and Off-Road sales are expected to be up mid-single digits and high-single digits, respectively, supported by elevated levels of medium and heavy-duty equipment production.
- Industrial sales are expected to increase between 8% and 12% year over year.
- IFS and Aerospace and Defense are forecast to grow high-single digits and low-double digits, respectively.
- Free cash flow conversion is expected to be between 110% and 120%.
Challenges Ahead
- Currency translation is expected to have a negative impact of approximately 4%.
- Aftermarket sales are projected to increase low-single digits as improved global supply chain conditions and resulting customer inventory reductions limit results.
- Life Sciences sales are expected to decline between 5% and 9% compared with prior year due to continued Disk Drive market weakness.
- Fiscal 2023 GAAP operating margin is forecast to be between 14.1% and 14.5% and adjusted operating margin is expected to be between 14.6% and 15.0%.
- Fiscal 2023 interest expense is projected to be approximately $20 million.