DONALDSON Co INC (DCI) Stock Analysis and Metrics

Donaldson

NYSE: DCI

$92.79 ▲ +1.65 (+1.81%)

At close: Jul 24, 2026 · 3:59 PM UTC

Financial Ratios

Market Cap10.74 Bn

P/E28.39

P/S2.86

Div. Yield0.01

ROIC (Qtr)0.03

Total Debt (Qtr)680.80 Mn

Revenue Growth (1y) (Qtr)3.02

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About

Donaldson Company, Inc. is a global leader in technology-led filtration products and solutions. The company serves a broad range of industries and advanced markets by providing filtration systems and related services. Its core activities involve designing manufacturing and distributing filtration products that address complex contamination challenges across various sectors. Donaldson operates through more than 150 locations on six continents with 77 manufacturing and distribution centers. The company partners with customers ranging from small business owners to the world’s largest original equipment manufacturers to deliver reliable filtration solutions that meet stringent technical and performance requirements.

Donaldson generates revenue through the sale of filtration products and solutions across its three reportable segments. Primary products include replacement filters for air and liquid filtration applications filtration housings for new equipment production and systems related to exhaust and emissions. The company also offers industrial air filtration systems industrial gases purification systems hydraulic and lubrication filtration power generation aerospace and defense filtration and life sciences products such as bioprocessing equipment and consumables. Revenue is derived from original equipment manufacturers independent distributors OEM dealer networks and direct sales to end users in various industries. The company’s fiscal year 2025 revenue was distributed geographically with 44.2% from the U. S. and Canada 27.8% from Europe Middle East and Africa 17.2% from Asia Pacific and 10.8% from Latin America.

The company operates through the following segments: Mobile Solutions Industrial Solutions and Life Sciences.

• Mobile Solutions represents 62.1% of net sales in fiscal 2025 and is organized based on a combination of customers and products. It consists of the Off-Road On-Road and Aftermarket business units. Products include replacement filters for air and liquid filtration applications and filtration housings for new equipment production and systems related to exhaust and emissions. Applications cover air filtration systems fuel lube and hydraulic systems emissions systems and sensors indicators and monitoring systems. Mobile Solutions sells to original equipment manufacturers in the construction mining agriculture and transportation end markets and to independent distributors and OEM dealer networks.

• Industrial Solutions represents 29.9% of net sales in fiscal 2025 and is organized based on product type. It consists of Industrial Air Filtration Industrial Gases Industrial Hydraulics Power Generation and Aerospace and Defense products. These are further organized by the Industrial Filtration Solutions and Aerospace and Defense business units. Products include dust fume and mist collectors compressed air and industrial gases purification systems hydraulic and lubricated filtration applications gas and liquid filtration for industrial processes air inlet systems for gas compression power generation and natural gas liquification and air fuel lubrication and hydraulic filtration for aerospace and defense applications. Industrial Solutions businesses sell through OEMs distributors and direct-to-consumer channels in some markets.

• Life Sciences represents 8.0% of net sales in fiscal 2025 and is organized by end market. It consists of the Food and Beverage Disk Drive Vehicle Electrification and Medical Device Microelectronics and Bioprocessing Equipment and Consumables markets. Products include micro-environment gas and liquid filtration for food and beverage and industrial processes bioprocessing equipment such as bioreactors and fermenters bioprocessing consumables including chromatography devices reagents and filters polytetrafluoroethylene membrane-based products and specialized air and gas filtration systems for applications including hard disk drives semiconductor manufacturing sensors battery systems and powertrain components. Life Sciences primarily sells to large OEMs and directly to various end users requiring cell growth separation purification high purity filtration and device protection.

Donaldson believes it is a market leader within many of its product lines particularly within its Off-Road and On-Road product lines for OEMs and in the Aftermarket business for replacement filters. The company participates in highly competitive filtration markets across all segments. Principal methods of competition include technology innovation product performance service price and geographic coverage. The Mobile Solutions segment faces competition from several large global competitors and many regional competitors especially in the Aftermarket business. The Industrial Solutions segment competes against large global competitors and numerous smaller competitors that focus on specific geographical regions or limited product applications. The Life Sciences segment contends with several large global competitors as well as niche players in individual markets served by the segment.

Donaldson serves a diverse customer base including small business owners and the world’s largest original equipment manufacturer brands. The company sells to original equipment manufacturers in construction mining agriculture and transportation industries. It also distributes through independent distributors and OEM dealer networks. In the Life Sciences segment Donaldson sells to large OEMs and directly to end users requiring high purity filtration for applications such as cell growth separation and purification. Industrial Solutions customers include industrial manufacturers in metals mining transportation chemicals food and beverage pharmaceuticals construction materials and emerging markets such as electric vehicle manufacturing recycling and alternative power. The company does not disclose specific customer names in the filing.

Investment Thesis

▲ Bull case

Donaldson Company is positioned for sustainable long-term growth through its strategic integration of Facet Filtration, which enhances its exposure to durable, high-margin end markets such as aerospace and power generation. Facet contributes approximately 70% of its revenue from recurring, regulated replacement parts with highly accretive margins, creating a resilient aftermarket business model that reduces cyclicality and drives predictable cash flow. Although management noted the Facet acquisition would be dilutive in the short term, the integration is progressing well, with procurement synergies expected in the $4–5 million range and untapped revenue synergies anticipated through cross-selling opportunities, such as combining Facet’s fuel systems with Donaldson’s airflow expertise in marine applications. The company’s disciplined approach to M&A ensures that Facet aligns with its strategy of pursuing acquisitions that strengthen the portfolio and meet strict financial criteria, and the early integration phase has already yielded encouraging operational alignment despite Middle East uncertainties. This acquisition not only diversifies Donaldson’s end-market exposure but also strengthens its leadership in technology-led filtration by adding complementary capabilities that can be leveraged across multiple industrial and aerospace platforms, creating a foundation for multi-year growth that the market may be underestimating given the current focus on near-term integration costs.
Donaldson’s Mobile and Life Sciences segments are delivering robust, structural growth that is being underestimated by the market due to temporary headwinds in the Industrial segment. Mobile Solutions achieved 8.1% sales growth in Q3 FY26, driven by strong aftermarket performance (8.1% growth, including double-digit gains in the independent channel) and recovery in off-road construction and on-road truck production in EMEA, supported by improving utilization rates and a significant competitive win with a major North American fleet operator. Life Sciences surged 12.7% year-over-year, fueled by new equipment volume in food and beverage and ongoing strength in disk drive, with food and beverage sales growing over 30% due to new technology-led offerings and an expanding installed base driving recurring consumables demand. These segments benefit from secular trends such as increased vehicle utilization, rising demand for clean processing in food and beverage, and sustained growth in data center cooling (an adjacency highlighted in the Q&A), which are not fully reflected in the company’s conservative 3–5% organic sales guidance. The market appears to be anchoring to the Industrial segment’s near-term challenges, overlooking the powerful, self-reinforcing growth dynamics in these higher-margin, aftermarket-driven businesses that are expanding both geographically and into new applications like data center filtration.
Donaldson’s operational discipline and cost structure optimization are creating a sustainable platform for margin expansion that is not yet fully priced into the stock, despite near-term gross margin pressures. The company completed the final two plants in its footprint optimization initiative during Q3, transitioning now to ramp up productivity in receiving sites, with expectations of $10 million in annualized savings by fiscal 2027 run rate. Additionally, the power generation segment’s production shifts to Mexico, which caused approximately 80 basis points of gross margin pressure in Q3, are viewed as a temporary low point, with delivery performance improving and full recovery expected midway through fiscal 2027. These initiatives, combined with strong expense leverage (operating expenses as a % of sales improved 40 basis points year-over-year to 17.8%), are driving structural efficiency gains. Management emphasized that the current margin performance represents a record level despite temporary inefficiencies, and with a clear path to eliminating headwinds, they are confident in generating more meaningful margin expansion in future periods. The market may be underappreciating how these foundational improvements—coupled with pricing power, new product launches like the Stratos Mist Collector, and a disciplined capital allocation strategy—will compound to deliver margin expansion beyond current guidance, especially as Industrial segment normalizes and Facet begins to contribute positively to profitability.

Donaldson Company is positioned for sustainable long-term growth through its strategic integration of Facet Filtration, which enhances its exposure to durable, high-margin end markets such as aerospace and power generation. Facet contributes approximately 70% of its revenue from recurring, regulated replacement parts with highly accretive margins, creating a resilient aftermarket business model that reduces cyclicality and drives predictable cash flow. Although management noted the Facet acquisition would be dilutive in the short term, the integration is progressing well, with procurement synergies expected in the $4–5 million range and untapped revenue synergies anticipated through cross-selling opportunities, such as combining Facet’s fuel systems with Donaldson’s airflow expertise in marine applications. The company’s disciplined approach to M&A ensures that Facet aligns with its strategy of pursuing acquisitions that strengthen the portfolio and meet strict financial criteria, and the early integration phase has already yielded encouraging operational alignment despite Middle East uncertainties. This acquisition not only diversifies Donaldson’s end-market exposure but also strengthens its leadership in technology-led filtration by adding complementary capabilities that can be leveraged across multiple industrial and aerospace platforms, creating a foundation for multi-year growth that the market may be underestimating given the current focus on near-term integration costs.
Donaldson’s Mobile and Life Sciences segments are delivering robust, structural growth that is being underestimated by the market due to temporary headwinds in the Industrial segment. Mobile Solutions achieved 8.1% sales growth in Q3 FY26, driven by strong aftermarket performance (8.1% growth, including double-digit gains in the independent channel) and recovery in off-road construction and on-road truck production in EMEA, supported by improving utilization rates and a significant competitive win with a major North American fleet operator. Life Sciences surged 12.7% year-over-year, fueled by new equipment volume in food and beverage and ongoing strength in disk drive, with food and beverage sales growing over 30% due to new technology-led offerings and an expanding installed base driving recurring consumables demand. These segments benefit from secular trends such as increased vehicle utilization, rising demand for clean processing in food and beverage, and sustained growth in data center cooling (an adjacency highlighted in the Q&A), which are not fully reflected in the company’s conservative 3–5% organic sales guidance. The market appears to be anchoring to the Industrial segment’s near-term challenges, overlooking the powerful, self-reinforcing growth dynamics in these higher-margin, aftermarket-driven businesses that are expanding both geographically and into new applications like data center filtration.
Donaldson’s operational discipline and cost structure optimization are creating a sustainable platform for margin expansion that is not yet fully priced into the stock, despite near-term gross margin pressures. The company completed the final two plants in its footprint optimization initiative during Q3, transitioning now to ramp up productivity in receiving sites, with expectations of $10 million in annualized savings by fiscal 2027 run rate. Additionally, the power generation segment’s production shifts to Mexico, which caused approximately 80 basis points of gross margin pressure in Q3, are viewed as a temporary low point, with delivery performance improving and full recovery expected midway through fiscal 2027. These initiatives, combined with strong expense leverage (operating expenses as a % of sales improved 40 basis points year-over-year to 17.8%), are driving structural efficiency gains. Management emphasized that the current margin performance represents a record level despite temporary inefficiencies, and with a clear path to eliminating headwinds, they are confident in generating more meaningful margin expansion in future periods. The market may be underappreciating how these foundational improvements—coupled with pricing power, new product launches like the Stratos Mist Collector, and a disciplined capital allocation strategy—will compound to deliver margin expansion beyond current guidance, especially as Industrial segment normalizes and Facet begins to contribute positively to profitability.

▼ Bear case

Donaldson Company faces significant near-term headwinds in its Industrial Solutions segment that are being underestimated by management’s optimistic outlook, particularly in Aerospace and Defense and Industrial Filtration Solutions, which could persist longer than anticipated due to unresolved supply chain complexities and weak capital expenditure trends. Aerospace and Defense sales declined 13.5% in Q3 FY26 due to weaker new equipment sales, driven by ongoing supply chain constraints and project timing, with management acknowledging that large, highly complex systems are delayed by waiting on single components or materials. Although backlogs are near record levels, the company admitted uncertainty about how much of this backlog can be shipped in the remaining quarters of fiscal 2026, suggesting conversion risk. Furthermore, Industrial Filtration Solutions, while showing modest 2.3% sales growth, is being offset by volume declines in industrial gases and dust collection, and the segment’s pretax margin fell to 13.4% from 18.1% year-over-year due to gross margin pressure from power generation production shifts and footprint optimization costs. The company’s expectation of a sequential step-up in Q4 industrial margin relies on operational improvements that have yet to materialize fully, and if supply chain issues in aerospace or delays in power generation ramp-up persist, the Industrial segment could remain a drag on overall profitability, contradicting the confidence expressed in a strong margin recovery.
Donaldson’s capital allocation strategy, while disciplined in principle, poses risks to shareholder returns due to the debt-funded nature of the Facet acquisition and the potential for delayed synergy realization, which could strain free cash flow and limit flexibility. The $829 million all-cash acquisition of Facet added approximately $9 million of interest expense in Q3 and is expected to contribute roughly $26 million in interest expense for the full fiscal year 2026, increasing leverage to approximately 1.8x net debt to EBITDA. Although management emphasized financial flexibility remains ample, the company has paused share repurchases to focus on paying down Facet-related debt, having repurchased only 1.2% of shares outstanding year-to-date, offsetting only stock compensation dilution. The net EPS dilution from Facet is estimated at $0.03 for fiscal 2026, and while management cautioned against annualizing this as $0.12 (implying accretion in year two), the timing and magnitude of revenue and cost synergies remain uncertain—procurement synergies are pegged at $4–5 million, but revenue synergies were not modeled into the deal justification and are described as “not determined at this point.” If integration takes longer than expected or synergies fall short, the debt burden could constrain future M&A, dividend growth, or share repurchases, undermining the company’s long-standing commitment to returning capital to shareholders, including its 30-year streak of dividend increases and status as a S&P High-Yield Dividend Aristocrat.
Donaldson’s growth projections for fiscal 2026 appear overly reliant on pricing and currency benefits, with organic volume growth expectations potentially too aggressive given weakening trends in key end markets such as on-road truck production and broad-based agriculture, which could limit upside and expose the company to demand volatility. While management cited mid-single digit growth expectations for off-road and aftermarket sales, on-road sales are projected to decrease low-single digits due to tempered global truck production, and broad-based ag remains constrained, with only niche applications like small ag and turf showing pockets of improvement. Life sciences growth, though strong at 9–11% projected, is heavily dependent on food and beverage and disk drive, both of which could face cyclical or technological headwinds—food and beverage may see slowing capex as customers digest prior investments, and disk drive faces long-term demand uncertainty from shifts in data storage technology. The company’s organic sales guidance of 3–5% assumes pricing and currency each contribute slightly over 1%, implying that volume growth must carry the bulk of the increase, yet several core markets are showing mixed or weakening signals. If pricing power diminishes due to competitive pressures or if currency tailwinds reverse, the company could struggle to meet even the low end of its guidance, particularly if Industrial segment recovery lags and Mobile aftermarket growth fails to accelerate as expected from share gains and utilization trends.

Donaldson Company faces significant near-term headwinds in its Industrial Solutions segment that are being underestimated by management’s optimistic outlook, particularly in Aerospace and Defense and Industrial Filtration Solutions, which could persist longer than anticipated due to unresolved supply chain complexities and weak capital expenditure trends. Aerospace and Defense sales declined 13.5% in Q3 FY26 due to weaker new equipment sales, driven by ongoing supply chain constraints and project timing, with management acknowledging that large, highly complex systems are delayed by waiting on single components or materials. Although backlogs are near record levels, the company admitted uncertainty about how much of this backlog can be shipped in the remaining quarters of fiscal 2026, suggesting conversion risk. Furthermore, Industrial Filtration Solutions, while showing modest 2.3% sales growth, is being offset by volume declines in industrial gases and dust collection, and the segment’s pretax margin fell to 13.4% from 18.1% year-over-year due to gross margin pressure from power generation production shifts and footprint optimization costs. The company’s expectation of a sequential step-up in Q4 industrial margin relies on operational improvements that have yet to materialize fully, and if supply chain issues in aerospace or delays in power generation ramp-up persist, the Industrial segment could remain a drag on overall profitability, contradicting the confidence expressed in a strong margin recovery.
Donaldson’s capital allocation strategy, while disciplined in principle, poses risks to shareholder returns due to the debt-funded nature of the Facet acquisition and the potential for delayed synergy realization, which could strain free cash flow and limit flexibility. The $829 million all-cash acquisition of Facet added approximately $9 million of interest expense in Q3 and is expected to contribute roughly $26 million in interest expense for the full fiscal year 2026, increasing leverage to approximately 1.8x net debt to EBITDA. Although management emphasized financial flexibility remains ample, the company has paused share repurchases to focus on paying down Facet-related debt, having repurchased only 1.2% of shares outstanding year-to-date, offsetting only stock compensation dilution. The net EPS dilution from Facet is estimated at $0.03 for fiscal 2026, and while management cautioned against annualizing this as $0.12 (implying accretion in year two), the timing and magnitude of revenue and cost synergies remain uncertain—procurement synergies are pegged at $4–5 million, but revenue synergies were not modeled into the deal justification and are described as “not determined at this point.” If integration takes longer than expected or synergies fall short, the debt burden could constrain future M&A, dividend growth, or share repurchases, undermining the company’s long-standing commitment to returning capital to shareholders, including its 30-year streak of dividend increases and status as a S&P High-Yield Dividend Aristocrat.
Donaldson’s growth projections for fiscal 2026 appear overly reliant on pricing and currency benefits, with organic volume growth expectations potentially too aggressive given weakening trends in key end markets such as on-road truck production and broad-based agriculture, which could limit upside and expose the company to demand volatility. While management cited mid-single digit growth expectations for off-road and aftermarket sales, on-road sales are projected to decrease low-single digits due to tempered global truck production, and broad-based ag remains constrained, with only niche applications like small ag and turf showing pockets of improvement. Life sciences growth, though strong at 9–11% projected, is heavily dependent on food and beverage and disk drive, both of which could face cyclical or technological headwinds—food and beverage may see slowing capex as customers digest prior investments, and disk drive faces long-term demand uncertainty from shifts in data storage technology. The company’s organic sales guidance of 3–5% assumes pricing and currency each contribute slightly over 1%, implying that volume growth must carry the bulk of the increase, yet several core markets are showing mixed or weakening signals. If pricing power diminishes due to competitive pressures or if currency tailwinds reverse, the company could struggle to meet even the low end of its guidance, particularly if Industrial segment recovery lags and Mobile aftermarket growth fails to accelerate as expected from share gains and utilization trends.

Segments Breakdown of Revenue (2025)

Peer Comparison

Companies in the Specialty Industrial Machinery

S.No.	Ticker	Company	Market Cap	P/E	P/S	Total Debt (Qtr)
1	GEV	GE Vernova Inc.	270.93 Bn	28.46	6.55	2.79 Bn
2	ETN	Eaton Corp plc	156.55 Bn	39.19	5.50	21.05 Bn
3	PH	Parker-Hannifin Corp	124.04 Bn	35.64	5.91	9.58 Bn
4	CMI	Cummins Inc	91.66 Bn	34.29	2.70	6.89 Bn
5	EMR	Emerson Electric Co	82.90 Bn	67.34	4.53	13.36 Bn
6	ITW	Illinois Tool Works Inc	81.54 Bn	26.02	5.03	9.15 Bn
7	AME	Ametek Inc/	55.40 Bn	36.26	7.29	2.18 Bn
8	ROK	Rockwell Automation, Inc	51.78 Bn	53.05	5.88	3.69 Bn

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Investment Thesis

Geographical Breakdown of Revenue (2025)

Segments Breakdown of Revenue (2025)

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Investment Thesis

Geographical Breakdown of Revenue (2025)

Segments Breakdown of Revenue (2025)

Peer Comparison

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