Donaldson reported GAAP net earnings of $92.5 million for the second quarter of fiscal 2026, down from $95.9 million a year earlier.

Donaldson Company, Inc. (NYSE: DCI) (Donaldson or the Company), a global leader in technology-led filtration products and solutions, today reported second quarter fiscal 2026 generally accepted accounting principles (GAAP) net earnings of $92.5 million, compared with $95.9 million a year ago. Earnings per share (EPS)1 were $0.78 compared with second quarter fiscal 2025 EPS of $0.79. Second quarter fiscal 2026 results include $6.7 million of pre-tax, non-recurring net charges versus $6.6 million in the prior year. Excluding these items, adjusted second quarter results2,3 reflect net earnings of $97.5 million compared with $101.0 million in fiscal 2025, and EPS of $0.83, flat versus a year ago.

"This quarter, the Donaldson team delivered record sales, strengthened the foundation to meet strong customer demand in key, high-margin businesses and made further progress on our footprint optimization initiatives, despite near-term challenges," said Tod Carpenter, chairman, president and chief executive officer. "We also made investments to drive sustainable growth as evidenced by our agreement to acquire Facet, which expands our core product portfolio with fuel and fluid filtration capabilities in durable end markets including Aerospace and Defense and Power Generation.

"Supported by our strong backlogs and expected improvement in operating performance in the second half of the year, we project record sales, operating margin and earnings in fiscal 2026. The Donaldson team is committed to solving our customers' challenges through our technology-led solutions, strategically investing for our future, and generating long-term shareholder value."

Second Quarter Operating Results

Sales of $896.3 million increased 3.0% compared with 2025 driven by favorable foreign currency translation and pricing benefits, partially offset by volume declines.

Mobile Solutions segment (Mobile) sales increased 1.6% as pricing and currency translation more than offset volume declines. Off-Road sales increased 7.8% as a result of improving end-market conditions. On-Road sales decreased 9.2% due to lower global truck production. Aftermarket sales rose 1.1% from solid independent channel sales, partially offset by declines in the OE channel after comparing against strong order volume in the prior year.

Industrial Solutions segment (Industrial) sales rose 2.4% versus prior year as currency translation and pricing were partially offset by volume declines, particularly in Aerospace and Defense. Industrial Filtration Solutions (IFS) sales increased 7.2%, driven by robust growth in Power Generation new equipment sales. Aerospace and Defense sales decreased 19.4% due to sales timing.

Life Sciences segment (Life Sciences) sales increased 16.2% as a result of strong new equipment sales in Food and Beverage and Disk Drive, combined with benefits from currency translation.

Gross margin was 33.5%, down versus 35.2% in 2025. Operating inefficiencies, including those related to production shifts to support higher demand in Power Generation within Industrial Solutions and costs associated with footprint optimization initiatives, were partially offset by higher pricing. Adjusted gross margin, excluding restructuring and other charges, was 33.7%.

Operating expenses as a percentage of sales were 20.2%, favorable by 50 basis points versus 20.7% in 2025, driven by cost optimization initiatives and expense discipline, partially offset by restructuring and other charges. Adjusted operating expenses as a percentage of sales were 19.7% compared with 20.0% a year ago.

Operating income as a percentage of sales (operating margin) was 13.2% versus 14.4% in 2025 as a result of the gross margin decline. Adjusted operating margin was 14.0%.

Interest expense was $7.7 million versus $5.9 million a year ago, primarily due to higher debt levels and higher average interest rates. Other income, net was $5.6 million compared with $5.4 million in 2025. The Company's effective tax rate was 20.7%, favorable compared to 23.2% a year ago as a result of an increase in discrete tax benefits.

Year to date, Donaldson paid $69.3 million in dividends and repurchased 1.2% of its shares outstanding for $108.6 million.

During the quarter, the Company entered into a definitive agreement to acquire Facet, a provider of fuel and fluid filtration solutions for mission-critical applications, in an all-cash transaction valued at approximately $820 million. The acquisition is expected to close during the second half of fiscal year 2026.

Updated Fiscal 2026 Outlook

Adjusted full-year EPS is expected to be within a range of $3.93 and $4.01, compared with a previous range of $3.95 and $4.11 and excluding a $0.02 per share net charge recognized in the first half of 2026. Fiscal 2025 GAAP and adjusted EPS were $3.05 and $3.68, respectively. Sales are projected to increase 1% to 5% versus prior year, consistent with previous expectations, with currency translation and pricing each contributing one percentage point. Tariff impacts are forecast to be immaterial.

Mobile sales are expected to grow 2% to 6% year over year compared with flat to 4% growth previously, due to favorable currency translation. Off-Road sales are projected to grow mid-single digits as select end-market conditions improve following weakness in the prior year. On-Road sales are forecast to be flat as a result of muted global truck production. Aftermarket sales are expected to increase mid-single digits from continued market share gains and vehicle utilization rates.

Industrial sales are projected to be in a range of between -1% and 3% compared with 2025, below previous guidance of between 2% and 6% as a result of lower volumes. IFS sales are forecast to grow low-single digits with increases across several key businesses, including dust collection and Power Generation. Aerospace and Defense sales are expected to decrease mid-single digits versus 2025 due to project timing and after cycling against record levels in the prior year.

Life Sciences sales are expected to increase between 5% and 9% year over year, above previous guidance of 1% and 5% due to favorable currency translation combined with increased volume. Food and Beverage and Disk Drive sales are forecast to drive the growth versus 2025.

Adjusted 2026 operating margin is expected to be between 16.0% and 16.4%, down from previous guidance of between 16.2% and 16.8%, driven by gross margin. Fiscal 2025 operating margin was 13.4%, or 15.7% on an adjusted basis. The year-over-year improvement in operating margin is driven by gross margin expansion and operating expense leverage.

Interest expense is estimated to be approximately $26 million and other income is forecast to be between $17 million and $19 million. Donaldson projects a fiscal 2026 adjusted effective income tax rate of between 22% and 24%.

Capital expenditures are forecast to be between $60 million and $75 million and adjusted free cash flow conversion is expected to be in a range of 85% and 95%. Related to the anticipated closing of the Facet transaction, Donaldson does not anticipate repurchasing additional shares in the second half of the year. As such, full-year repurchases are expected to remain unchanged from the current year-to-date total of 1.2%.

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