DCI - Donaldson reports mixed Q4 earnings; updates FY23 outlook to high end of previous range

• Donaldson press release ( NYSE: DCI ): Q2 Non-GAAP EPS of $0.75 beats by $0.07 .
• Revenue of $828.3M (+3.2% Y/Y) misses by $9.99M .
• Donaldson tightens fiscal 2023 EPS guidance to high end of previous range : Fiscal 2023 full-year GAAP EPS is expected to be between $2.89 and $2.97, inclusive of $0.10 of first half restructuring and other charges. Adjusted EPS is forecast between $2.99 and $3.07 vs $3.14 consensus. Sales are projected to increase between 2% to 6% over prior year vs. estimated growth of 2.29% Y/Y, driven by a 6% increase in pricing and a negative impact from currency translation of approximately 4%.
• Fiscal 2023 Mobile sales are projected to increase between 1% and 5% compared with 2022, driven by strength in On-Road and Off-Road sales which are expected to be up mid-single digits and high-single digits, respectively.
• Fiscal 2023 Industrial sales are expected to increase between 8% and 12% year over year. .
• Fiscal 2023 Life Sciences sales are expected to decline between 5% and 9% compared with prior year.
• Fiscal 2023 GAAP operating margin is forecast to be between 14.1% and 14.5% and adjusted operating margin is expected to be between 14.6% and 15.0%. Prior year GAAP and adjusted operating margin were 13.4% and 13.5%, respectively.
• Fiscal 2023 interest expense is projected to be approximately $20 million and other income is expected to be between $6 million and $10 million. Donaldson expects a fiscal 2023 effective income tax rate of between 24% and 26%.
• Fiscal 2023 capital expenditures are forecast to be between $115 million and $130 million and free cash flow conversion is expected to be between 110% and 120%. For the full year, Donaldson expects to repurchase approximately 2% of its shares outstanding.

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