Donaldson Company, Inc. (DCI) Stock: Earnings Momentum Builds as Buybacks Hit 3.3% in 2025

TLDR

DCI soared to $73.44 as adjusted EPS hit $0.99 and share repurchases fueled investor confidence.

Adjusted net income climbed 4.8% to $118.9M, overcoming $62M in asset impairments.

DCI raised full-year guidance as Q3 margins improved and 3.3% of shares were bought back YTD.

Aerospace & Defense surged 27.1%, offsetting declines in Mobile Solutions and bioprocessing delays.

Q3 saw $192M in buybacks, a dividend hike, and stronger guidance, reinforcing bullish sentiment.

Donaldson Company, Inc. (NYSE: DCI) stock climbed on June 3 following its fiscal Q3 earnings report and capital return updates. The stock touched an intraday high of $73.44 after opening below $69, before closing at $71.21. Strong adjusted earnings and a 3.3% year-to-date share repurchase supported bullish momentum.

Donaldson Company, Inc. (DCI)

Adjusted Earnings Show Strength Amid Intangible Asset Impairments

Donaldson reported GAAP net income of $57.8 million for the third quarter, impacted by $65.8 million in non-recurring charges. These charges included a $62 million impairment of intangible assets from bioprocessing subsidiaries Univercells Technologies and Solaris. However, adjusted net income reached $118.9 million, showing a 4.8% year-over-year increase.

The company posted adjusted earnings per share (EPS) of $0.99, up 7.6% compared to the prior year’s $0.92. It reported total sales of $940.1 million, supported by pricing gains and modest volume growth across key markets. Donaldson’s adjusted operating margin rose to 16.3%, driven by improved cost control and reduced warranty expenses.

Donaldson Company, $DCI, Q3-25. Results:

📊 Adj. EPS: $0.99 🟢
💰 Revenue: $940.1M 🟢
🔎 Record sales and adjusted EPS despite impairment charges; strong aftermarket and Aerospace & Defense demand boosted results. pic.twitter.com/XNdiJrbefA

— EarningsTime (@Earnings_Time) June 3, 2025

Gross margin fell to 34.2% from 35.6% due to higher production costs, though adjusted gross margin stood at 34.5%. Operating expenses jumped to 24.9% of sales, but excluding charges, adjusted operating expenses improved to 18.2%. The firm also raised its adjusted EPS guidance midpoint by $0.03, projecting full-year EPS between $3.64 and $3.70.

Segment Performance Mixed as Industrial Division Leads

Mobile Solutions sales dipped 0.4%, weighed by weak transportation and agricultural markets, though aftermarket parts demand showed growth. On-Road sales dropped 24.5% and Off-Road declined 8.3%, but independent channels helped boost overall aftermarket sales by 3.3%. Price adjustments helped partially offset volume pressures in the segment.

Industrial Solutions recorded a 5.3% sales increase, mainly driven by solid Aerospace and Defense growth of 27.1%. Industrial Filtration Solutions also saw a 1.4% increase as replacement part demand remained steady despite slower new equipment sales. Donaldson anticipates 2% to 4% growth in industrial sales for the full year.

Life Sciences sales rose 0.7% amid strength in Disk Drive and Food & Beverage replacement products, offset by bioprocessing delays. The company expects high single-digit growth in the segment, citing stable end-market conditions. Market demand for industrial bioreactors and early-stage bioprocessing assets has softened considerably.

Shareholder Returns Accelerate Through Dividends and Buybacks

Donaldson repurchased 2.4% of its shares in Q3, totaling $192.4 million in buybacks. This brought total buybacks to 3.3% of outstanding shares year-to-date, with a full-year target of up to 4%. The company also paid $32.3 million in dividends during the quarter.

Capital returns remain a key focus, with Donaldson increasing its quarterly dividend by 11% this year. Year-to-date dividends now stand at $96.9 million. The firm plans to allocate between $75 million and $90 million in capital expenditures, prioritizing growth and operational improvements.

The company’s tax rate rose to 33.6%, though the adjusted rate was 22.1%, which was in line with expectations. Due to higher rates, interest expense rose slightly to $5.7 million, while other income totaled $5.3 million. Donaldson projects adjusted free cash flow conversion between 80% and 90% for the full fiscal year.

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