Donaldson's Q2 Earnings Miss Estimates, Revenues Decline Y/Y

Core Insights - Donaldson Company, Inc. reported second-quarter fiscal 2025 adjusted earnings of 83 cents per share, missing the Zacks Consensus Estimate of 85 cents, but showing a year-over-year increase of 2.5% [1] - Total revenues for the quarter were $870.0 million, below the Zacks Consensus Estimate of$ 909 million, reflecting a year-over-year decrease of 0.8% [2] Revenue Results - Revenue breakdown by region showed a 3.8% increase in the United States/Canada, a 9.2% decrease in Europe, the Middle East, and Africa, a 1.7% increase in Latin America, and a 0.5% increase in Asia Pacific [2] - The Mobile Solutions segment accounted for 62.9% of net sales, generating $547.5 million, down 0.5% year over year, with significant declines in Off-Road (12.8%) and On-Road (24.4%) businesses, while aftermarket sales improved by 4% [3] - Industrial Solutions segment revenues were$ 253.7 million, down 3.7% year over year, with Industrial Filtration Solutions sales declining by 7.5%, although Aerospace and Defense businesses saw an 18.7% increase [4] - Life Sciences segment revenues increased by 9.2% year over year to $68.8 million, driven by volume growth in the Disk Drive business [4] Margin Profile - Cost of sales decreased by 0.7% year over year to$ 564.1 million, while gross profit declined by 0.9% to $305.9 million, maintaining a gross margin of 35.2% [5] - Operating expenses rose by 0.8% year over year to$ 180.4 million, leading to a 3.1% decrease in operating profit to $125.5 million, with an operating margin of 14.4% [5] - The effective tax rate was 23.2%, slightly down from 23.5% in the previous year [5] Balance Sheet & Cash Flow - Cash and cash equivalents at the end of the quarter were$ 189.1 million, down from $232.7 million in the previous quarter, while long-term debt increased to$ 514.7 million from $483.4 million [6] - In the first six months of fiscal 2025, net cash generated from operating activities was$ 163.3 million, a decrease of 27.4% year over year, with free cash flow down 33.9% to $119.4 million [7] - The company repurchased$ 81.4 million in stock and paid out $64.6 million in dividends during the first half of fiscal 2025 [8] FY25 Outlook - For fiscal 2025, adjusted earnings per share are expected to be in the range of$ 3.60- $3.68, compared to$ 3.42 in fiscal 2024, with sales anticipated to be flat to increase by 4% [9] - Segment-wise, Mobile Solutions sales are expected to decrease by 1% to increase by 3%, Industrial Solutions sales are projected to grow by 1-5%, and Life Sciences sales are expected to rise in the high single-digit range [10] - Interest expenses are estimated at approximately $21 million, with other income projected between$ 18-$20 million, and an effective tax rate anticipated between 23% and 25% [11]