Donaldson Q4 Results Top Estimates; Guides 2014 In Line

(RTTNews) - Filtration systems provider Donaldson Co., Inc. (DCI) reported Tuesday a profit for the fourth quarter that increased 2 percent from last year, despite a revenue decline, reflecting improved margins.

Both adjusted earnings per share and quarterly revenues topped analysts' expectations. The company also provided earnings and revenue forecast for the full-year 2014, in line with Street view.

"Despite our lower overall sales, we delivered higher operating income with a record operating margin of 15.8 percent. Over the last year, we have worked to align our manufacturing and operating expenses with current Customer demand while generating significant savings from our ongoing Continuous Improvement initiatives," Chairman, President and CEO Bill Cook said in a statement.

Cook noted that the company delivered record net income and earnings per share in the fourth quarter, due to strong operating margin performance.

The Minneapolis, Minnesota-based company reported net earnings of $72.61 million or $0.48 per share for the fourth quarter, just higher than $70.98 million or $0.47 per share in the prior-year quarter.

Excluding restructuring charges, adjusted net earnings for the latest quarter was $73.47 million or $0.49 per share. On average, ten analysts polled by Thomson Reuters expected the company to report earnings of $0.45 per share for the quarter. Analysts' estimates typically exclude special items.

Net sales for the quarter decreased 4 percent to $632.59 million from $656.83 million in the same quarter last year, but topped nine Wall Street analysts' consensus estimate of $620.54 million.

The company noted that overall sales decreased primarily due to engine products OEM businesses in the U.S. and Asia as well as the company's industrial products businesses. Meanwhile, engine aftermarket sales increased 3 percent from last year.

The company noted that foreign currency translation negatively impacted net earnings by $0.3 million or 0.4 percent, and sales by $3.5 million or 0.5 percent, during the quarter.

Gross margin for the quarter improved 110 basis points to 36.1 percent from last year's 35.0 percent, primarily due to a higher percentage of sales coming from replacement filters and the benefits from the ongoing continuous improvement program.

As a percent of sales, operating expenses increased 50 basis points to 20.3 percent from last year's 19.8 percent.

For fiscal 2013, the company reported net income of $247 million or $1.64 per share, lower than $264 million or $1.73 per share in the prior year. Analysts expected the company to report earnings of $1.62 per share for fiscal 2013.

Net revenues for the full year declined 2 percent to $2.44 billion from $2.49 billion in the previous year. Street was looking for full-year 2013 revenues of $2.43 billion.

Looking ahead to fiscal 2014, the company expects earnings in a range of $1.65 to $1.85 per share, on projected revenues between $2.45 billion and $2.55 billion.

Street is currently looking for full-year 2014 earnings of $1.80 per share on annual revenues of $2.52 billion.

"Looking forward, we believe that many of our end markets have now stabilized and will begin to grow moderately during the second half of our FY14. Overall, we are expecting our full year sales to increase percentage-wise in the low- to mid-single digits in FY14," Cook added.

DCI closed Monday's regular trading session at $36.91, up $0.40 on a volume of 0.49 million shares. In the past 52-week period, the stock has been trading in a range of $30.90 to $39.36.