Donaldson Company, Inc. DCI is benefiting from strength across all segments. The Mobile Solutions segment is experiencing higher volume in the aftermarket business, driven by increased vehicle utilization rates. Solid momentum in the off-road business, owing to increased demand across end markets, also bodes well. In the second quarter of fiscal 2026 (ended Jan. 31, 2026), the segment’s sales increased 1.6% year over year.
The Industrial Solutions segment is driven by strength in the Industrial Filtration Solutions business. Growth in demand for products in the power generation market is driving the segment’s performance. The segment’s sales increased 2.4% year over year in the fiscal quarter.
Growth in sales for new equipment across food & beverage and disk drives markets is boosting the Life Sciences segment. The segment’s sales rose 16.2% year over year in the fiscal second quarter. Driven by strength across the businesses, DCI expects its sales to increase 1-5% in fiscal 2026 from the prior-year level.
The company remains focused on acquiring businesses to gain access to new customers, regions and product lines. In February 2026, it inked a deal to acquire Filtration Group’s Facet Filtration business for $820 million in cash. The acquisition is expected to complement and enhance the company’s fuel and fluid filtration portfolio used in critical applications.
Donaldson remains committed to increasing shareholders’ value through dividend payments and share repurchases. Dividend payments totaled $69.3 million in the first six months of fiscal 2026. The company bought back shares worth $108.6 million in the first six months of fiscal 2026. It also hiked its quarterly dividend by 11.1% in May 2025.
Few Near-Term Headwinds
Despite the positives, the company is witnessing weakness in the on-road business. Lower levels of global truck production, owing to softness in industrial markets, are affecting the company's on-road business. In the fiscal second quarter, the on-road business’ sales declined 9.2% on a year-over-year basis.
The rising cost of goods sold has also been a major concern for the company. In the first six months of fiscal 2026, the metric rose 5.1% year over year due to increased restructuring and related expenses. The impact of these expenditures is evident in the rise of the cost of sales as a percentage of total revenues (in the first six months), which climbed 100 basis points to reach 65.7%.
DCI, which belongs to the Zacks Pollution Control industry, faces stiff competition from several peers, including Parker-Hannifin Corporation PH, Ingersoll Rand Inc. IR and Graco Inc. GGG.
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This article originally published on Zacks Investment Research (zacks.com).
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