NYSE:DCI
DONALDSON Co INC
A global leader in filtration and fluid control solutions serving mining, energy, and process industries with a focus on reliability and customer service.
Key Metrics
Investment Thesis
Bull Case
Donaldson is an attractive investment for growth investors seeking exposure to essential industrial infrastructure with a track record of double-digit revenue expansion over the past three years. The company's disciplined capital allocation strategy, evidenced by significant share buybacks and strong free cash flow conversion, supports shareholder value creation even during cyclical downturns. Its diversified geographic footprint and sticky customer relationships provide a defensive characteristic that can outperform broader industrial peers.
Bear Case
Skeptics may worry about the company's exposure to commodity-dependent sectors like mining and oil and gas, which could face prolonged headwinds from lower energy prices or reduced exploration spending. The significant retained earnings deficit of $2.61B suggests historical capital intensity that requires consistent cash flow generation to avoid balance sheet stress in a recessionary environment. Additionally, the recent decline in net income despite revenue growth warrants close monitoring of margin compression risks and potential cost inflation.
About DONALDSON Co INC
Donaldson Company Inc. provides filtration, separation, and fluid control solutions primarily serving the mining, oil and gas, power generation, and process industries globally. With a strong presence in North America and international markets, the company leverages its extensive network of service centers to deliver critical equipment and consumables for industrial applications. The firm has demonstrated consistent revenue growth over the last three years while maintaining healthy profitability margins.
Analysis
Management Discussion
Management delivered robust operational performance with revenue reaching $3.69B in 2025, up from $3.43B in 2023, demonstrating resilience in volatile industrial markets. The company generated strong operating cash flow of $418.8M, allowing for significant capital returns including $331.5M in share repurchases and dividends, while investing $78.9M in capital expenditures to maintain its asset base. Despite a slight dip in net income to $367.0M from 2024's peak of $414.0M, the company maintained healthy liquidity with $180.4M in cash equivalents.
Industry Overview
The industrial filtration and fluid control market is highly competitive but characterized by high barriers to entry due to the specialized engineering required for mining and energy applications. Industry leaders benefit from long-term contracts with major E&P companies and miners, creating stable cash flow streams that are less sensitive to short-term market volatility. Technological advancements in separation efficiency and sustainability continue to drive demand for premium filtration solutions across emerging markets.
Financial Statements
Income Statement
Balance Sheet
Cash Flow
| Metric | 2023 | 2024 | 2025 |
|---|---|---|---|
| Revenue | $3.43B | $3.59B | $3.69B |
| Cost of Revenue | $2.27B | $2.31B | $2.40B |
| Gross Profit | $1.16B | $1.27B | $1.29B |
| Operating Expenses | $680.4M | $730.3M | $790.8M |
| Operating Income | $480.2M | $544.1M | $495.4M |
| R&D | $78.1M | $93.6M | $87.8M |
| G&A | $602.3M | $636.7M | $641.0M |
| Stock-Based Comp | $20.4M | $22.0M | $24.0M |
| D&A | $92.3M | $98.4M | $99.5M |
| Depreciation | $80.9M | $82.8M | $85.6M |
| Amortization | $11.4M | $15.7M | $13.9M |
| Other OpEx | $0 | $0 | $62.0M |
| Non-Operating Income | $-11.5M | $-8.8M | $-3.2M |
| Interest Expense | $19.2M | — | — |
| Pre-Tax Income | $468.7M | $535.3M | $492.2M |
| Income Tax | $109.9M | $121.3M | $125.2M |
| Continuing Ops | $358.8M | $414.0M | $367.0M |
| Discontinued Ops | $0 | $0 | $0 |
| Net Income | $358.8M | $414.0M | $367.0M |
| Minority Interest | $0 | $0 | $0 |
| Net to Common | $358.8M | $414.0M | $367.0M |
| Metric | 2023 | 2024 | 2025 |
|---|---|---|---|
| Current Assets | $1.29B | $1.44B | $1.46B |
| Cash & Equivalents | $187.1M | $232.7M | $180.4M |
| Accounts Receivable | $599.7M | $629.7M | $662.2M |
| Inventory | $418.1M | $476.7M | $513.6M |
| Prepaid Expenses | $81.1M | $99.0M | $105.5M |
| Other Current Assets | $0 | $0 | $0 |
| Long-Term Assets | $1.48B | $1.48B | $1.52B |
| PP&E (Net) | $652.9M | $645.5M | $644.5M |
| Intangibles | $188.1M | $171.9M | $97.4M |
| Goodwill | $481.1M | $478.4M | $493.6M |
| Operating Leases | $59.4M | $59.7M | $60.5M |
| Other LT Assets | $103.0M | $120.7M | $219.5M |
| Total Assets | $2.77B | $2.91B | $2.98B |
| Current Liabilities | $756.4M | $782.5M | $757.2M |
| Accounts Payable | $304.9M | $379.4M | $368.6M |
| Current Leases | $17.8M | $20.2M | $24.1M |
| Deferred Revenue | $25.3M | $19.7M | — |
| Other Current Liab | $378.0M | $330.7M | $364.5M |
| Long-Term Liabilities | $693.4M | $642.7M | $766.5M |
| LT Operating Leases | $42.4M | $41.3M | $37.8M |
| Other LT Liab | $594.5M | $561.6M | $709.7M |
| Total Liabilities | $1.45B | $1.43B | $1.52B |
| Shareholders' Equity | $1.32B | $1.49B | $1.45B |
| Paid-In Capital | $24.8M | $26.8M | $35.8M |
| Retained Earnings | $2.09B | $2.38B | $2.61B |
| AOCI | $-172.5M | $-198.9M | $-180.7M |
| Total L&E | $2.77B | $2.91B | $2.98B |
| Metric | 2023 | 2024 | 2025 |
|---|---|---|---|
| Net Income (CFO) | $358.8M | $414.0M | $367.0M |
| Non-Cash Adjustments | $380.8M | $-134.2M | $44.4M |
| Working Capital Changes | $-195.1M | $212.7M | $7.4M |
| Cash from Operations | $544.5M | $492.5M | $418.8M |
| Capital Expenditures | $118.5M | $85.6M | $78.9M |
| Cash from Investing | $-327.3M | $-86.9M | $-150.4M |
| Debt Issuances | $189.2M | $119.7M | $388.1M |
| Debt Repayments | $219.6M | $228.8M | $265.0M |
| Share Buybacks | $141.8M | $162.7M | $331.5M |
| Dividends Paid | $114.4M | $122.8M | $131.9M |
| Cash from Financing | $-222.2M | $-355.9M | $-321.7M |
| FX Effect | $-1.2M | $-4.1M | $1.0M |
| Net Change in Cash | $-6.2M | $45.6M | $-52.3M |
| Beginning Cash | $193.3M | $187.1M | $232.7M |
| Ending Cash | $187.1M | $232.7M | $180.4M |
Frequently Asked Questions
How does DONALDSON Co INC make money?
The company's revenue streams are diversified across mining services, oil and gas processing, power generation filtration, and general industrial process applications. Financials indicate significant sales to capital-intensive sectors like mining and energy, supported by substantial accounts receivable reflecting large-scale B2B contracts and equipment sales.
What are the main risks for DCI?
Cyclical downturns in mining and oil and gas sectors could significantly impact demand for capital equipment and filtration consumables given the heavy reliance on these industries. Rising raw material costs and supply chain disruptions pose threats to gross profit margins, especially when competing against established pricing structures in commoditized segments. Currency exchange fluctuations may affect international cash flows, while potential environmental regulations could necessitate costly upgrades to separation technologies.
What is DCI's competitive advantage?
Donaldson holds a strong moat through its extensive global service center network that ensures rapid equipment support and parts availability for critical industrial operations. The company benefits from high switching costs in specialized filtration applications where downtime is costly, fostering deep customer loyalty and recurring consumable revenue. Its proprietary separation technologies and industry-specific solutions provide differentiated value propositions that are difficult for new entrants to replicate quickly.
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Not financial advice. All content is for informational purposes only. Data may contain errors. Consult a qualified financial advisor before making investment decisions.