Donaldson’s third quarter results for 2025 were well received by the market, with the company outperforming Wall Street’s expectations for both revenue and non-GAAP earnings. Management highlighted robust growth in key segments, including mobile aftermarket, power generation, and food and beverage, which contributed to the sales and margin expansion. CEO Todd Carpenter credited the company’s “razor-to-sell razor blades model” and ongoing cost optimization initiatives for driving operational leverage. The team also pointed to share gains in the independent channel and strong execution in China as underpinning this quarter’s growth.
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Donaldson (DCI) Q3 CY2025 Highlights:
- Revenue: $935.4 million vs analyst estimates of $923.1 million (3.9% year-on-year growth, 1.3% beat)
- Adjusted EPS: $0.94 vs analyst estimates of $0.92 (1.8% beat)
- Adjusted EBITDA: $174.6 million vs analyst estimates of $172.3 million (18.7% margin, 1.3% beat)
- Management slightly raised its full-year Adjusted EPS guidance to $4.03 at the midpoint
- Operating Margin: 16%, up from 14.5% in the same quarter last year
- Constant Currency Revenue rose 2.6% year on year (5.5% in the same quarter last year)
- Organic Revenue rose 2.6% year on year
- Market Capitalization: $10.63 billion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions From Donaldson’s Q3 Earnings Call
- Brian Drab (William Blair) asked about the underlying drivers of strength in industrial filtration and whether connected machines would exceed 30% growth. CFO Brad Pogalz confirmed continued success in power generation and that the company remains on track for its connected equipment targets.
- Angel Castillo (Morgan Stanley) inquired about pricing trends and why full-year guidance assumes slower pricing than Q3. COO Rich Lewis explained that pricing has normalized to pre-pandemic conditions and is not expected to remain at first-quarter levels.
- Adam Farley (Stifel) sought clarification on share gains versus restocking in the aftermarket and potential for future growth moderation. CEO Todd Carpenter confirmed a mix of share gains and typical customer restocking behavior, noting that growth may moderate as the year progresses.
- Laurence Alexander (Jefferies) pressed for details on the rate of market share gains and capacity needs for power generation amid data center expansion. Carpenter responded that share gains are low single digits in mature markets and that capacity investments position the company well for future demand.
- Tim Thein (Raymond James) asked about the timing and expected impact of footprint optimization savings on operating margin. Pogalz indicated that most benefits will be realized in the second half of the year through gross margin expansion and volume leverage.
Catalysts in Upcoming Quarters
In upcoming quarters, the StockStory team will be monitoring (1) progress on facility consolidation and the realization of structural cost savings, (2) sustained order strength and execution in power generation and data center filtration projects, and (3) continued market share gains in aftermarket and life sciences segments. We will also watch for further reductions in tariff exposure and any signs of recovery in muted end markets like agriculture and on-road trucks.
Donaldson currently trades at $92.14, up from $87.60 just before the earnings. Is there an opportunity in the stock?The answer lies in our full research report (it’s free for active Edge members).
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