Fourth quarter and full year fiscal 2026
Filed Aug 25, 2026Donaldson Reports Record Fourth Quarter and Full-Year 2026 Sales and Earnings; Fiscal 2027 Guidance Projects All-Time High Sales and EPS
Fourth-quarter sales increased 8.0% to $1,058.8 million, GAAP diluted EPS increased 13.4% to $1.10, and GAAP operating margin expanded 120 basis points to 16.7%. Full-year sales rose 5.3% to $3,885.6 million and GAAP diluted EPS increased 26.2% to $3.85. Fiscal 2027 guidance calls for 5.5% to 9.5% sales growth, EPS of $4.22 to $4.38, and operating margin of 16.6% to 17.2%, while also incorporating approximately $0.12 of Facet dilution.
Key metrics
as reported| Metric | Value | q/q | y/y |
|---|---|---|---|
| Net sales, fourth quarter fiscal 2026GAAP | $1,058.8 million | – | 8.0% |
| Net sales, full year fiscal 2026GAAP | $3,885.6 million | – | 5.3% |
| Gross profit, fourth quarter fiscal 2026GAAP | $383.9 million | – | 13.3% |
| Gross profit, full year fiscal 2026GAAP | $1,345.9 million | – | 4.6% |
| Gross margin, fourth quarter fiscal 2026GAAP | 36.3% | – | up 180 basis points |
| Adjusted gross margin, fourth quarter fiscal 2026non-GAAP | 36.7% | – | – |
| Gross margin, full year fiscal 2026GAAP | 34.6% | – | – |
| Adjusted gross margin, full year fiscal 2026non-GAAP | 35.1% | – | – |
| Operating expenses, fourth quarter fiscal 2026GAAP | $207.3 million | – | 10.8% |
| Operating expenses as a percentage of sales, fourth quarter fiscal 2026GAAP | 19.6% | – | – |
| Adjusted operating expenses as a percentage of sales, fourth quarter fiscal 2026non-GAAP | 19.1% | – | – |
| Operating income, fourth quarter fiscal 2026GAAP | $176.6 million | – | 16.4% |
| Operating income, full year fiscal 2026GAAP | $599.9 million | – | 21.1% |
| Operating margin, fourth quarter fiscal 2026GAAP | 16.7% | – | 120 basis points above prior year |
| Adjusted operating margin, fourth quarter fiscal 2026non-GAAP | 17.5% | – | 110 basis point increase |
| Operating margin, full year fiscal 2026GAAP | 15.4% | – | – |
| Adjusted operating margin, full year fiscal 2026non-GAAP | 16.0% | – | – |
| Net earnings, fourth quarter fiscal 2026GAAP | $129.3 million | – | 13.1% |
| Net earnings, full year fiscal 2026GAAP | $453.8 million | – | 23.7% |
| Diluted EPS, fourth quarter fiscal 2026GAAP | $1.10 | – | 13.4% |
| Adjusted diluted EPS, fourth quarter fiscal 2026non-GAAP | $1.15 | – | 11.7% |
| Diluted EPS, full year fiscal 2026GAAP | $3.85 | – | 26.2% |
| Adjusted diluted EPS, full year fiscal 2026non-GAAP | $3.98 | – | 8.2% |
| Interest expense, fourth quarter fiscal 2026GAAP | $14.7 million | – | 107.0% |
| Interest expense, full year fiscal 2026GAAP | $36.0 million | – | 48.8% |
| Effective tax rate, fourth quarter fiscal 2026GAAP | 22.5% | – | – |
| Effective tax rate, full year fiscal 2026GAAP | 22.5% | – | – |
| Net cash provided by operating activities, fourth quarter fiscal 2026GAAP | $199.9 million | – | – |
| Net cash provided by operating activities, full year fiscal 2026GAAP | $493.7 million | – | – |
| Free cash flow, fourth quarter fiscal 2026non-GAAP | $185.2 million | – | – |
| Free cash flow, full year fiscal 2026non-GAAP | $426.5 million | – | – |
| Cash conversion ratio, full year fiscal 2026other | 96.3% | – | – |
| Adjusted cash conversion ratio, full year fiscal 2026non-GAAP | 90.8% | – | – |
Segments
| Segment | Revenue | q/q | y/y |
|---|---|---|---|
| Mobile Solutions, fourth quarter fiscal 2026Strength in Aftermarket and On-Road. Aftermarket sales grew 9.4% from robust growth in both the OE and independent channels, while On-Road sales rose 8.7% due to increased truck production in the United States and Europe. | $634.9 million | – | 7.9% |
| Off-Road, fourth quarter fiscal 2026Sales growth in construction offset weaker agriculture sales. | $94.7 million | – | 0.1% |
| On-Road, fourth quarter fiscal 2026Increased truck production in the United States and Europe following volume declines in the prior year. | $28.6 million | – | 8.7% |
| Aftermarket, fourth quarter fiscal 2026Robust growth in both the OE and independent channels. | $511.6 million | – | 9.4% |
| Industrial Solutions, fourth quarter fiscal 2026The Facet acquisition within Aerospace and Defense contributed 980 basis points of growth to the Industrial segment. Industrial Solutions EBT margin improved 300 basis points sequentially. | $333.5 million | – | 7.7% |
| Industrial Filtration Solutions, fourth quarter fiscal 2026Weaker new equipment sales in dust collection were partially offset by strength in Power Generation new equipment and IFS replacement part sales. | $257.2 million | – | (2.0)% |
| Aerospace and Defense, fourth quarter fiscal 2026Facet contributed to growth, while organic Aerospace and Defense sales declined 2.8% due to ongoing supply chain constraints. | $76.3 million | – | 61.0% |
| Life Sciences, fourth quarter fiscal 2026Double-digit growth in Disk Drive and solid new equipment and replacement part sales in Food and Beverage. | $90.4 million | – | 9.7% |
| Mobile Solutions, full year fiscal 2026Full-year growth was led by Aftermarket sales growth of 6.4% and Off-Road sales growth of 5.6%, partly offset by a 6.6% decline in On-Road sales. | $2,419.7 million | – | 5.6% |
| Industrial Solutions, full year fiscal 2026Aerospace and Defense sales increased 5.2% and Industrial Filtration Solutions sales increased 2.0%. | $1,132.7 million | – | 2.6% |
| Life Sciences, full year fiscal 2026The filing reported 12.8% sales growth. | $333.2 million | – | 12.8% |
Full year fiscal 2027 outlook
- RevenueSales growth of between 5.5% and 9.5%, including an approximate 2% benefit from Facet sales, pricing of 2%, and a foreign currency translation tailwind of 1%.
- Operating expensesExpense deleveraging, largely as a result of the full-year impact of Facet run-rate expenses as well as higher amortization expense.
- Tax rateEffective income tax rate of between 23.5% and 25.5%.
- NoteEPS between $4.22 to $4.38, including approximately $0.12 of dilution from Facet.
- NoteOperating margin between 16.6% and 17.2%.
- NoteMobile sales expected to increase 2% to 6% year over year.
- NoteOff-Road sales projected to increase mid-single digits.
- NoteOn-Road sales estimated to increase high-single digits.
- NoteAftermarket sales forecast to grow mid-single digits.
- NoteIndustrial sales expected to grow mid-teens versus 2026.
- NoteIFS sales forecast to increase mid-single digits.
- NoteAerospace and Defense sales projected to increase over 50%.
- NoteOrganic Aerospace and Defense sales growth forecast in the mid-teens.
- NoteLife Sciences sales projected to grow between 7% and 11% compared with prior year.
- NoteInterest expense projected to be between $55 million and $60 million.
- NoteOther income expected to be between $16 million and $20 million.
- NoteCapital expenditures forecast to be between $70 million and $90 million.
- NoteFree cash flow conversion projected to be between 95% and 105%.
- NoteExpected repurchases of approximately 1% of shares outstanding.
Capital returns
- Returned approximately $37 million to shareholders through dividends in the fourth quarter and paid down $102 million of Facet-related debt.
- For the full year, paid $141.2 million in dividends and repurchased 1.2% of outstanding shares for $108.5 million.
- The cash flow statement reports purchase of treasury stock of $111.2 million and dividends paid of $141.2 million for full year fiscal 2026.
- Full-year fiscal 2027 repurchases are expected to be approximately 1% of shares outstanding.
- Dividends paid per share were $0.32 in the fourth quarter, compared with $0.30, and $1.22 for full year fiscal 2026, compared with $1.11.
What drove it
- Fourth-quarter sales growth reflected higher volume, approximately $30 million from the Facet acquisition, and pricing benefits.
- Higher volume, pricing and mix drove gross-margin expansion, partially offset by increased input costs and continued Power Generation production inefficiencies.
- Facet generated favorable mix to enterprise gross margin and contributed about $30 million in fourth-quarter sales.
- Mobile Solutions benefited from Aftermarket channel growth and higher truck production in the United States and Europe.
- Life Sciences grew through Disk Drive demand and Food and Beverage new-equipment and replacement-part sales.
- Full-year fiscal 2027 sales guidance includes an approximate 2% benefit from Facet, pricing of 2%, and a foreign currency translation tailwind of 1%.
Concerns
- Industrial Filtration Solutions fourth-quarter sales declined 2.0%, reflecting weaker new-equipment sales in dust collection.
- Organic Aerospace and Defense fourth-quarter sales declined 2.8% due to ongoing supply chain constraints.
- Industrial Solutions fourth-quarter EBT was $54.7 million, down 15.3%, and its EBT margin was 16.4%, compared with 20.9%.
- Operating expenses as a percentage of fourth-quarter sales increased to 19.6% from 19.1%, driven by Facet-related run-rate expenses and amortization and higher incentive compensation.
- Fourth-quarter interest expense increased to $14.7 million from $7.1 million because of higher debt levels from Facet and higher interest rates.
- Fiscal 2027 operating-margin guidance reflects expected expense deleveraging from full-year Facet run-rate expenses and higher amortization expense.
What to watch
- Execution of the forecast mid-teens Industrial sales growth, including IFS mid-single-digit growth and Aerospace and Defense growth of over 50%.
- The expected mid-teens organic Aerospace and Defense growth as supply chain conditions improve after fiscal 2026 pressure.
- Whether Power Generation production inefficiencies and higher input costs continue to constrain gross-margin performance.
- Delivery of the guided 16.6% to 17.2% fiscal 2027 operating margin despite anticipated Facet-related expense deleveraging and higher amortization.
- Interest expense, guided to $55 million to $60 million in fiscal 2027 versus $36 million in fiscal 2026, and progress on debt reduction.
- Achievement of 95% to 105% free cash flow conversion and the planned repurchase of approximately 1% of shares outstanding.
Balance sheet and cash flow
- Cash and cash equivalents were $250.4 million at July 31, 2026, compared with $180.4 million at July 31, 2025.
- Long-term debt was $1,280.0 million at July 31, 2026, compared with $630.4 million at July 31, 2025. Short-term borrowings were $44.8 million, compared with $31.2 million.
- Full-year net cash provided by operating activities was $493.7 million, compared with $418.8 million; free cash flow was $426.5 million, compared with $342.0 million.
- Full-year acquisitions, net of cash acquired, were $822.6 million. Proceeds from long-term debt were $858.9 million and repayments of long-term debt were $216.2 million.
- Cash and cash equivalents increased $70.0 million during fiscal 2026.
Analysis
Donaldson closed fiscal 2026 with record fourth-quarter sales and earnings. Fourth-quarter net sales increased 8.0% to $1,058.8 million, GAAP net earnings increased 13.1% to $129.3 million, and GAAP diluted EPS rose 13.4% to $1.10. Adjusted diluted EPS was $1.15, up 11.7%. For the full year, sales increased 5.3% to $3,885.6 million, while GAAP diluted EPS increased 26.2% to $3.85 and adjusted diluted EPS increased 8.2% to $3.98.
Revenue growth was broad but not uniform. Mobile Solutions increased 7.9% in the fourth quarter, supported by 9.4% Aftermarket growth and 8.7% On-Road growth, while Off-Road was roughly flat as construction growth offset weaker agriculture. Industrial Solutions increased 7.7%, but Facet contributed 980 basis points of growth to the segment. Aerospace and Defense revenue increased 61.0%, although organic Aerospace and Defense sales declined 2.8% because of supply chain constraints. Industrial Filtration Solutions declined 2.0% on weaker dust-collection new-equipment demand. Life Sciences increased 9.7%, driven by Disk Drive and Food and Beverage activity.
Profitability improved materially at the enterprise level. Fourth-quarter GAAP gross margin rose 180 basis points to 36.3%, with higher volume, pricing and mix partly offset by input costs and Power Generation production inefficiencies. GAAP operating margin increased 120 basis points to 16.7%, while adjusted operating margin increased 110 basis points to 17.5%. Mobile Solutions EBT margin rose to 21.3% from 19.1% and Life Sciences EBT margin rose to 11.9% from 5.3%. Industrial Solutions EBT margin was 16.4%, below 20.9% a year earlier, though management highlighted a 300 basis point sequential improvement.
Capital allocation reflected both the Facet acquisition and shareholder distributions. Donaldson spent $822.6 million on acquisitions, net of cash acquired, during fiscal 2026, and long-term debt rose to $1,280.0 million at year-end from $630.4 million. The company paid down $102 million of Facet-related debt in the fourth quarter. Full-year operating cash flow was $493.7 million and free cash flow was $426.5 million. Donaldson paid $141.2 million in dividends and repurchased 1.2% of outstanding shares for $108.5 million, while the cash flow statement reported $111.2 million of treasury-stock purchases.
Fiscal 2027 guidance calls for another record year, with sales growth of 5.5% to 9.5%, EPS of $4.22 to $4.38, and operating margin of 16.6% to 17.2%. The sales outlook includes approximately 2% from Facet, pricing of 2%, and a 1% foreign-currency translation tailwind. The guide assumes mid-teens Industrial growth, including over 50% Aerospace and Defense growth from incremental Facet sales and mid-teens organic Aerospace and Defense growth. The key offsets are projected expense deleveraging from Facet run-rate costs and higher amortization, along with interest expense of $55 million to $60 million versus $36 million in fiscal 2026.
Management, verbatim
Donaldson’s fourth quarter sales and earnings reached an all-time high, driven by strong organic volume growth, augmented by the acquisition of Facet Filtration, and supported by robust execution across all three of our segments.
Rich Lewis, president and chief executive officer
We enter fiscal 2027 focused on capitalizing on increasing demand in several of our key, higher-margin businesses, further improving our operating efficiency and thoughtfully investing for future profitable growth, all aimed at serving our customers through our differentiated technology-led solutions.
Rich Lewis, president and chief executive officer
Not in the filing
stated, not guessed- Previous quarterly release or prior fiscal 2026 outlook, so comparison of actual results with prior guidance is unavailable.
- CFO commentary from a named executive.
- Quarterly balance sheet and cash flow statements for a prior sequential quarter.
- Consensus estimates, analyst expectations, price targets, and share-price reaction.
AlphaAI analysis generated from the company’s SEC earnings filing (Form 8-K Item 2.02, or Form 6-K for a foreign private issuer). Every figure was cross-checked against the filing text; consensus estimates, price targets and share-price reactions are not shown because they are not in the filing. AI-generated research, not investment advice.