Donaldson: A Dip, Not a Disaster!

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Alright, folks, gather ’round! So, Donaldson Company (DCI +0.48%)…they were doing the jig, up nearly 24% this year. A real hoedown! Then, earnings time hit, and bam! Down 18.2% it went. A financial pratfall, if you will. But hold your horses! Don’t go selling in a panic just yet. I’ve seen more dramatic reversals at a vaudeville show.

They posted record numbers for Q2 of fiscal 2026 – a lovely accomplishment, really – but the analysts, those fussy critics, wanted more. More, more, more! It’s always more with them. Even promising a record year couldn’t save the stock price. It’s like trying to stop a runaway train with a feather duster.

Why the Fluster?

Turns out, sales dipped a bit in Q2. On-road equipment sales were sluggish, thanks to a global truck production slowdown. And aerospace and defense? Let’s just say they weren’t exactly launching rockets. But, they did manage 3% revenue growth! Through clever pricing and some currency magic. It’s like a magician pulling rabbits out of a hat, only the hat is a balance sheet.

Operating margin took a tiny tumble, from 14.4% to 13.2%. A minor scrape, really. They also lowered their adjusted earnings per share guidance – a smidge, mind you, from $3.95-$4.11 to $3.93-$4.01. It’s like ordering a deluxe pizza and getting one with slightly fewer olives. The horror!

This little adjustment, this minor detail, sent the stock into a tailspin. Honestly, some investors are more sensitive than a prima donna.

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An Opportunity, Not a Catastrophe!

Now, here’s where I, your friendly neighborhood activist investor, come in. Those numbers aren’t as dreadful as they seem. A revised guidance still points towards a record 2026! And, get this, Donaldson is acquiring Facet for $820 million! A bold move, I tell you, a bold move! It’s like a character in a melodrama deciding to elope with the villain!

Facet, you see, specializes in filtration for aerospace, defense, and power generation. Mission-critical stuff, folks! A quarter of their sales come from military applications – aviation, marine, land. They’re practically building the Batmobile over there! Plus, they’ll significantly expand Donaldson’s international footprint, with over 40% of sales outside North America. They’re going global, baby! It’s like a Bond film, only with filters!

They’re pausing the share repurchase program to fund the acquisition, which some might see as a negative. But I say, good! Focus on growth, not just buying back shares! It’s like a chef choosing fresh ingredients over a pre-made sauce. Facet should add substantial value to Donaldson’s business, and that, my friends, is why you shouldn’t write off this industrials stock just yet. In fact, this dip? It’s a buying opportunity. A chance to get in on the ground floor before this thing takes off. Trust me, I’ve seen enough comedies to know a good setup when I see one.

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2026-02-27 22:13