Donaldson Company Inc. reported record adjusted operating margins of 17.5% and quarterly sales exceeding $1 billion for the first time in its history during the fourth quarter of fiscal 2026, ending August 26. The industrial filtration specialist posted adjusted diluted earnings per share of $1.15 on revenue of $1.059 billion, surpassing analyst expectations of $1.13 per share on $1.04 billion in sales.
The company’s adjusted gross margin expanded to 36.7%, up 190 basis points year-over-year, while adjusted operating income grew 15%. Free cash flow conversion reached 136%, with cash from operations totaling $200 million, a 19% increase from the prior-year quarter. Donaldson paid down $102 million of debt related to the Facet acquisition during the period and returned $37 million to shareholders via dividends.
For the full fiscal year 2026, Donaldson reported total sales of $3.886 billion, a 5% increase from the prior year. Adjusted operating margins reached a record 16.0%, up 30 basis points, while adjusted diluted EPS rose 8% to $3.98. Cash from operations increased 18% to $494 million, with free cash flow conversion at 91%. Total shareholder returns amounted to $250 million, including $141 million in dividends and $109 million in share buybacks.
Segment performance showed mixed trends. Mobile Solutions sales rose 8% to $635 million, with earnings before tax up 21% to $136 million and margins improving 220 basis points to 21.3%. Industrial Solutions sales also increased 8% to $334 million, though earnings before tax declined 15% as margins contracted 450 basis points to 16.4%. Life Sciences sales grew 10% to $90 million, with earnings before tax rising to $11 million and margins expanding 660 basis points to 11.9%. The segment is set to be renamed Process Filtration starting in the first quarter of fiscal 2027.
Looking ahead, Donaldson provided guidance for fiscal 2027, projecting sales growth of 5.5% to 9.5% to approximately $4.2 billion. Adjusted operating margins are expected to range between 16.6% and 17.2%, while adjusted diluted EPS is forecast at $4.22 to $4.38, implying roughly 8% growth from fiscal 2026. Segment growth forecasts include mid-teens expansion for Industrial Solutions, 7% to 11% for Life Sciences, and 2% to 6% for Mobile Solutions.
The company assumes a tax rate of 23.5% to 25.5%, pricing benefits of about 2%, and interest expenses between $55 million and $60 million. Capital expenditures are projected at $70 million to $90 million, with free cash flow conversion expected between 95% and 105%.
