Donaldson's Financial Result Update Shows Y/Y Drop in Sales
Donaldson Company, Inc. DCI provided its business and financial update, considering the impacts of the coronavirus outbreak on its operational performance. Notably, the company’s share price gained 0.4% to eventually close at $50.86 yesterday.
Donaldson’s chief executive officer, Tod Carpenter, communicated that the safety of its workers, satisfaction of customers and measures to fight the pandemic remain priorities in the present difficult environment caused by the outbreak. Meanwhile, its region-to-support-region production footprint as well as supply-chain strategy has been proving beneficial for the company.
Inside the Headlines
Donaldson communicated that its fourth-quarter fiscal 2020 (ended July 2020) sales recorded a year-over-year fall of approximately 15%. This includes a year-over-year sales decline of about 24% in May, followed by sales improvement in June and July on a sequential basis. On a geographical basis, the company witnessed soft sales performance in the United States due to the adverse impacts of the pandemic and weakness across oil and gas markets. Sales for both the Asia Pacific and Europe, Middle East and Africa (“EMEA”) regions declined on a year-over-year basis. However, on a sequential basis, results improved for the EMEA region, driven by strong performance across eastern Europe.
The company stated that it maintained a solid financial position, with net-debt-to-EBITDA leverage ratio of 1.0 (as of June 2020 end), in line with its long-term target. Also, exiting June 2020, it had total liquidity of $560 million, including available cash and credit facilities. Dividend payouts are Donaldson's preferred modes of rewarding shareholders. In the year-to-date period, the company used $106 million for paying out dividends.
Fiscal 2021 Outlook
Donaldson expects that the initiatives being taken by it related to supply chain, manufacturing, and procurement will help it maintain a healthy margin performance. Capital expenditure will likely be lower, while operating expenses will be higher. It anticipates free cash flow conversion of more than 100%.
The company is scheduled to report fourth-quarter fiscal 2020 results on Sep 3, before market open.
Donaldson, with a $6.4-billion market capitalization, currently carries a Zacks Rank #3 (Hold). In the past three months, the company’s share price has increased 13.9% compared with the industry’s growth of 14.8%.
Stocks to Consider
Some better-ranked stocks are AptarGroup, Inc. ATR, Berry Global Group, Inc. BERY and Cintas Corporation CTAS. All these companies carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
AptarGroup delivered an earnings surprise of 5.62%, on average, in the trailing four quarters.
Berry Global delivered an earnings surprise of 16.34%, on average, in the trailing four quarters.
Cintas delivered an earnings surprise of 9.09%, on average, in the trailing four quarters.
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