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; $108.6 million repurchased year-to-date.

Financial highlights

• Q2 operating margin was 14%, down from 15.2% last year, due to gross margin pressure and operational inefficiencies; adjusted operating margin was 14.0%.

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

• Gross margin declined to 33.5% from 35.2% last year; adjusted gross margin was 33.7%.

• Free cash flow for Q2 was $18 million, down from $71.5 million a year ago; adjusted free cash flow conversion was 18% in Q2.

• Net leverage ratio at 0.7x, expected to rise to 1.7x post-Facet acquisition; total debt as of January 31, 2026, was $680.8 million.

Outlook and guidance

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

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

• Adjusted EPS forecasted at $3.93–$4.01, with 8% growth at the midpoint.

• Life Sciences segment expected to grow 5%–9% for FY26; Mobile sales expected to grow 2%–6%.

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