Donaldson Co. Inc.: Q2 FY2026 earnings call

What management said about Q2 FY2026, from the documents filed with the SEC on 26 February 2026: press release. Guidance figures: 4 raised, 6 lowered, 3 kept. The quarter’s numbers.

Read the filing

Key takeaways

• Record second-quarter sales: Net sales were $896.3 million, up 3.0%, on favorable currency translation and pricing, partly offset by volume declines. Constant-currency sales were down 0.1%. Source
• Adjusted EPS flat, GAAP EPS lower: Diluted GAAP EPS was $0.78 against $0.79. Adjusted EPS was $0.83, flat year over year. Adjusted net earnings were $97.5 million against $101.0 million. Source
• Operating margin declined on gross margin: Operating margin was 13.2% against 14.4%. Adjusted operating margin was 14.0% against 15.2%. The company attributed the decline to the gross margin drop. Source
• Aerospace and Defense sales fell 19.4%: Industrial Solutions sales rose 2.4%, with Industrial Filtration Solutions up 7.2%. Aerospace and Defense fell 19.4% on sales timing, to $37.1 million from $46.2 million. Source
• Gross margin fell to 33.5%: Gross margin was 33.5% against 35.2%. Adjusted gross margin, excluding restructuring and other charges, was 33.7%. Higher pricing partly offset the decline. Source
• Facet acquisition announced: Agreed to acquire Facet in an all-cash transaction valued at about $820 million. Facet provides fuel and fluid filtration for mission-critical applications. Source

“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.”

Tod Carpenter, chairman, president and chief executive officer

Guidance

What changed from last quarter

• Guidance lowered: Adjusted fiscal 2026 EPS range reduced at both ends. Source
• Guidance raised: Mobile sales growth range raised, on currency translation. Source
• Guidance raised: Aftermarket growth expectation raised to mid-single digits. Source
• Guidance lowered: Industrial sales growth range reduced, on lower volumes. Source
• Guidance lowered: IFS growth expectation reduced to low-single digits. Source
• Guidance lowered: Aerospace and Defense expectation changed to a decline. Source
• Guidance raised: Life Sciences growth range raised to 5% to 9%. Source
• Guidance lowered: Adjusted operating margin range reduced. Source
• Guidance raised: Interest expense estimate increased to about $26 million. Source
• Guidance raised: Other income estimate increased to $17 million to $19 million. Source
• Guidance lowered: Adjusted effective tax rate range reduced to 22% to 24%. Source
• Guidance lowered: Capital expenditure range reduced to $60 million to $75 million. Source
• Guidance lowered: Full-year share repurchases set at the year-to-date 1.2%. Source
• New: Agreed to acquire Facet, a fuel and fluid filtration provider, in an all-cash deal valued at about $820 million. Source

Results and growth drivers

• Record second-quarter sales: Net sales were $896.3 million, up 3.0%, on favorable currency translation and pricing, partly offset by volume declines. Constant-currency sales were down 0.1%. Source
• Adjusted EPS flat, GAAP EPS lower: Diluted GAAP EPS was $0.78 against $0.79. Adjusted EPS was $0.83, flat year over year. Adjusted net earnings were $97.5 million against $101.0 million. Source
• Operating margin declined on gross margin: Operating margin was 13.2% against 14.4%. Adjusted operating margin was 14.0% against 15.2%. The company attributed the decline to the gross margin drop. Source
• First-half sales and EPS higher: Six-month net sales rose 3.5% to $1,831.7 million. Six-month diluted EPS was $1.75 against $1.60. Source

Segments and regions

• Mobile sales rose 1.6%: Mobile Solutions sales rose 1.6% as pricing and currency translation more than offset volume declines. Off-Road rose 7.8%, On-Road fell 9.2%, Aftermarket rose 1.1%. Source
• On-Road fell on truck production: On-Road sales fell 9.2% due to lower global truck production. Off-Road sales rose 7.8% as end-market conditions improved. Source
• Aerospace and Defense sales fell 19.4%: Industrial Solutions sales rose 2.4%, with Industrial Filtration Solutions up 7.2%. Aerospace and Defense fell 19.4% on sales timing, to $37.1 million from $46.2 million. Source
• Life Sciences sales rose 16.2%: Life Sciences sales rose 16.2% to $80.0 million, with a segment pre-tax margin of 9.3% against negative 0.7% a year ago. Source
• Regional sales changes were mixed: As reported, total company sales changed 3.0%: U.S./Canada down 4.7%, EMEA up 16.0%, APAC up 8.7%, LATAM down 5.2%. Source

“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.”

Tod Carpenter, chairman, president and chief executive officer

Products and customers

• Aftermarket independent channel sales solid: Aftermarket rose 1.1% on independent channel sales. OE channel declines came after a period of high prior-year order volume. Source
• Power Generation new equipment growth: Industrial Filtration Solutions sales rose 7.2%, driven by new Power Generation equipment sales. Source
• Food and Beverage and Disk Drive equipment: Life Sciences growth came from new equipment sales to Food and Beverage and Disk Drive customers, plus currency translation benefits. Source

Costs, margins and pricing

• Gross margin fell to 33.5%: Gross margin was 33.5% against 35.2%. Adjusted gross margin, excluding restructuring and other charges, was 33.7%. Higher pricing partly offset the decline. Source
• Operating expenses ratio improved: Operating expenses were 20.2% of sales, 50 basis points lower. Adjusted operating expenses were 19.7% against 20.0%, from cost optimization and expense discipline. Source
• Lower effective tax rate: The effective tax rate was 20.7% against 23.2%, reflecting higher discrete tax benefits. Other income, net was $5.6 million against $5.4 million. Source

“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.”

Tod Carpenter, chairman, president and chief executive officer

Demand and order book

• Second-half operating improvement expected: Management cites backlogs and expected second-half operating improvement as support for its projection of record fiscal 2026 sales, operating margin and earnings. Source
• Off-Road end markets seen improving: Off-Road sales are projected to grow mid-single digits in fiscal 2026 as select end-market conditions improve after prior-year weakness. Source
• Truck production expected to stay muted: On-Road sales are forecast flat for fiscal 2026 because global truck production remains muted. Source

Capital, cash and returns to shareholders

• Free cash flow lower in quarter: Free cash flow was $18.0 million in the quarter against $71.5 million. Six-month free cash flow was $129.7 million against $119.4 million. Source
• Dividends and buybacks year to date: Year to date, the company paid $69.3 million in dividends and repurchased 1.2% of shares outstanding for $108.6 million. Source
• No further buybacks in second half: No additional share repurchases are planned for the second half, tied to the anticipated Facet closing. Full-year repurchases remain at 1.2%. Source
• Quarterly dividend per share raised: Dividends paid per share were $0.30 against $0.27, an increase of 11.1%. Source
• Long-term debt higher: Long-term debt was $674.3 million at January 31, 2026, against $630.4 million at July 31, 2025. Source

Strategy and investment

• Facet acquisition announced: Agreed to acquire Facet in an all-cash transaction valued at about $820 million. Facet provides fuel and fluid filtration for mission-critical applications. Source
• Facet described as margin-accretive: Management described the Facet acquisition as margin-accretive, strengthening the core filtration product portfolio. Source
• Footprint optimization continued: Management reported further progress on footprint optimization. Restructuring and other charges were $2.9 million in the quarter against $2.2 million a year earlier. Source

Coming up, as management said on 26 February 2026

• Facet closing expected in second half: The Facet acquisition is expected to close in the second half of fiscal 2026. No further share repurchases are planned for that period. Source
• Form 10-Q to follow: Results are preliminary and unaudited until the company files its results with the SEC on Form 10-Q. Source

Risks management discussed

• Operational: Operating inefficiencies from production shifts for Power Generation demand and footprint optimization costs weighed on gross margin. Source
• Financial: Interest expense rose on higher debt levels and higher average interest rates. Source
• Demand: Industrial sales growth expectation was reduced, on lower volumes. Source
• Demand: On-Road sales are expected to be flat for fiscal 2026 due to muted global truck production. Source
• Demand: Aerospace and Defense sales expected to decline, on project timing and a record prior-year comparison. Source
• External: The Mobile sales growth expectation depends in part on favorable currency translation. Source

Earlier plans management reported on

• On track: The prior release said the company remained on track to deliver a record fiscal 2026.
• Not stated: Management said the 1% to 5% sales growth projection is consistent with previous expectations. Source
• Not stated: Management said it made further progress on footprint optimization initiatives this quarter. Source

Other quarters

• Q4 FY2026 earnings call
• Q3 FY2026 earnings call
• Q1 FY2026 earnings call
• Q4 FY2025 results

Summarised with AI from the documents the company filed with the SEC. Every point is checked against the filing before it is shown: management’s own words word for word, figures against the line or table row they come from. A point that fails the check is left out. Source opens the filing at that line.