Donaldson Company (DCI) Q2 2026 earnings summary

Executive summary

• Achieved record Q2 sales of $896 million, up 3% year-over-year, driven by favorable currency and pricing, with growth across all segments despite volume declines.

• Announced the acquisition of Facet for $820 million, the largest in company history, expected to close in the second half of fiscal 2026 and expand the filtration portfolio in aerospace, defense, and power generation.

• Leadership transition: COO Richard Lewis named as incoming President and CEO, with Tod Carpenter moving to Executive Chairman.

• Returned $51 million to shareholders via dividends and share repurchases in Q2; paid $69.3 million in dividends and repurchased 1.2% of shares for $108.6 million year-to-date.

• Net earnings for Q2 were $92.5 million, down 3.6% from the prior year; adjusted net earnings were $97.5 million, flat year-over-year.

Financial highlights

• Q2 gross margin was 33.5%–33.7%, down 150–170 basis points year-over-year, due to operational inefficiencies, volume deleveraging, and footprint optimization costs.

• Adjusted operating margin was 14.0%, down from 15.2% last year.

• Adjusted EPS was $0.83, flat year-over-year; diluted EPS was $0.78, down from $0.79.

• Free cash flow for Q2 was $18 million, down from $71.5 million a year ago, impacted by increased working capital.

• Adjusted EBITDA for Q2 was $155.5 million.

Outlook and guidance

• Fiscal 2026 sales expected to reach a record $3.8 billion, with 1%–5% growth reaffirmed.

• Adjusted operating margin guidance revised to 16.0%–16.4%, still a record level.

• Adjusted EPS forecasted at $3.93–$4.01, midpoint $3.97, representing 8% growth on 3% sales growth.

• Free cash flow conversion projected at 85%–95%.

• No additional share repurchases planned in the second half due to Facet acquisition.