Executive Summary
Donaldson Company delivered a solid Q4 2024 performance with momentum across multiple segments and clear execution on a strategy designed to compound earnings over the next several years. Revenue for the fourth quarter was $935.4 million, up 6% year over year, driven primarily by higher volumes and aided by a modest pricing tailwind. The company reported a gross margin of 36.2% in the quarter and a 16.3% operating margin, underscoring disciplined cost management and favorable mix, with full-year gross margin at 35.6% and operating margin at 15.4% on a GAAP basis. Net income for the quarter was $109.7 million, or $0.94 per share (GAAP), with adjusted EPS of $3.42 for the full year, a 13% increase from the prior year. Cash flow remained robust, evidenced by a cash conversion of 93% in Q4 and a three-year trajectory of capital deployment that supports returning capital to shareholders (dividends and buybacks) while funding growth.
Management highlighted several levers underpinning the outlook: continued margin expansion in Mobile Solutions and Industrial Solutions driven by mix, volume, pricing, and deflation of select input costs; resilient Aftermarket strength; and a measured but meaningful ramp in Life Sciences, supported by the Medica S.p.A. investment in hollow fiber membrane technology. Donaldson guided 2025 sales growth of 2%–6% and an adjusted operating margin of 15.3%–15.9%, with adjusted EPS of $3.56–$3.72. For 2026, the company raised target margins in Mobile (18.1%–18.9%) and Industrial (17.8%–18.6%), signaling ongoing profitability upside even as Life Sciences earnings leverage remains more muted given macro headwinds. The long-term plan remains intact: grow profitability through a diversified, technology-led portfolio, sustain a meaningful R&D cadence, pursue select M&A (notably Life Sciences and Industrial Services), and maintain an active capital return program.
Key takeaways for investors include the following: (1) the base business is delivering resilient profitability with a strong cash-generating profile; (2) Life Sciences remains a growth vector but carries higher execution risk due to a slower bioprocessing ramp; (3) balance sheet strength and a disciplined capital allocation framework underpin the ability to fund growth, fund acquisitions, and return capital; (4) the path to higher long-term margins is intact, supported by mix and pricing advantages across core segments and ongoing cost optimization initiatives.
Key Performance Indicators
Key Insights
Revenue (Q4 2024): 935.4 million, up 6% YoY; Gross Profit: 334.8 million; Gross Margin: 35.8%; Operating Income: 146.2 million; Operating Margin: 15.63%; Net Income: 109.7 million; Net Margin: 11.7%; EPS (GAAP): 0.91; EPS (Diluted): 0.90; Full-year 2024 adjusted EPS: 3.42; YoY/ QoQ performance metrics show solid execution. Four-quarters data imply 6.36% revenue growth YoY and 11.56% gross profit growth YoY; Operating income up 21.33% YoY; Net income up 19.37% YoY; EPS up 19.74% YoY and -3.19% Qo...
Financial Highlights
Revenue (Q4 2024): 935.4 million, up 6% YoY; Gross Profit: 334.8 million; Gross Margin: 35.8%; Operating Income: 146.2 million; Operating Margin: 15.63%; Net Income: 109.7 million; Net Margin: 11.7%; EPS (GAAP): 0.91; EPS (Diluted): 0.90; Full-year 2024 adjusted EPS: 3.42; YoY/ QoQ performance metrics show solid execution. Four-quarters data imply 6.36% revenue growth YoY and 11.56% gross profit growth YoY; Operating income up 21.33% YoY; Net income up 19.37% YoY; EPS up 19.74% YoY and -3.19% QoQ. Cash flow: net cash provided by operating activities 126.0 million in Q4; free cash flow 106.2 million; cash and cash equivalents ended Q4 at 232.7 million; full-year cash conversion exceeded 97% (historical average). Leverage and liquidity metrics remained solid with total debt of 511.7 million and net debt of 304.0 million; cash balance and net debt position support ongoing capex and M&A activity. The company guides 2025 adjusted operating margin 15.3%–15.9% (midpoint ~15.6%), EPS 3.56–3.72, and 2%–3% share repurchases; 2026 targets raise Mobile and Industrial margins while Life Sciences profitability remains lower due to macro constraints.
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
935.40M |
6.36% |
0.81% |
| Gross Profit |
334.80M |
11.56% |
2.64% |
| Operating Income |
146.20M |
21.33% |
1.81% |
| Net Income |
109.70M |
19.37% |
-3.35% |
| EPS |
0.91 |
19.74% |
-3.19% |
Key Financial Ratios
operatingProfitMargin
15.6%
operatingCashFlowPerShare
$1.05
freeCashFlowPerShare
$0.88
dividendPayoutRatio
29.6%
Management Commentary
Theme 1 – Management commentary on performance and outlook. Tod Carpenter: “Fiscal 2024 was another record year for Donaldson Company, record sales, record margins and record EPS… We surpassed $3.5 billion in sales, achieved operating margin of 15.4% and delivered adjusted EPS of $3.42, a 13% increase above prior year… cash conversion was over 97%.” Theme 2 – Segment dynamics and mix benefits. Scott Robinson: “Gross margin of 36.2% increased 190 basis points… Operating margin 16.3%… driven by gross margin expansion and operating expense leverage.” Theme 3 – Life Sciences leverage and risk. Tod Carpenter and the Q&A discussions highlighted slower Life Sciences ramp, with near-term profitability expected to be near breakeven for 2025 and a longer path to margin expansion. Quote excerpts from the transcript mention: Medica S.p.A. stake and bioprocessing collaboration as a longer-term growth driver, with execution risk on ramp timelines. Theme 4 – Capital allocation and M&A strategy. Both Tod and Scott emphasized disciplined capital deployment, growth investments in R&D, and a commitment to dividend growth and modest buybacks; Scott noted cash conversion and debt reduction trajectories, with 2%–3% share repurchase guidance. Theme 5 – Near-term catalysts and risks. The Q&A covered expectations around IFS backlogs, Europe dust collection weakness, and the potential impact of first-fit mix on margins, with management signaling continued margin resilience through mix, volume, and pricing actions. Notable quotes: “We forecast full year total sales to increase between 2% and 6%... Consolidated operating margin between 15.3% and 15.9%” (Scott Robinson); “Mobile Solutions margin target range raised to 18.1%–18.9% by 2026” (Scott Robinson); “Life Sciences ramp is longer than initially expected” (Tod Carpenter).
"Fiscal 2024 was another record year for Donaldson Company, record sales, record margins and record EPS. We surpassed $3.5 billion in sales, achieved operating margin of 15.4% and delivered adjusted EPS of $3.42, a 13% increase above prior year. Our cash conversion was over 97%, well above our historical average and we returned $286 million to our shareholders through dividends and share buybacks."
— Tod Carpenter
"Gross margin of 36.2% increased 190 basis points above prior year from select input cost deflation and leverage on higher sales. Operating expenses as a percent of sales were 19.9% versus 20.0% a year ago from leverage on higher sales, partially offset by higher people-related costs and acquisition-related expenses."
— Scott Robinson
Forward Guidance
Outlook emphasizes durable profitability through a diversified mix. Near-term (2025) revenue growth 2%–6% with a 1% pricing tailwind and modest currency impact; Mobile Solutions 0%–4% growth, Industrial Solutions 4%–8%, Life Sciences low-double-digit revenue growth with near-term profitability near breakeven. Consolidated adjusted operating margin guided to 15.3%–15.9%, near all-time highs, signaling continued gross margin resilience and cost-leverage benefits. For 2026, management targets: Mobile margin 18.1%–18.9%, Industrial 17.8%–18.6%, Life Sciences lower growth and margins due to macro pressures; consolidated margin 15.8%–16.6% (midpoint ~16.2%) implying continued efficiency gains and a higher relative contribution from higher-margin segments. The 3-year sales CAGR target of 3%–7% is modestly below prior guidance due to Life Sciences ramp delays; however, profitability is expected to improve on stronger mix and efficiency in Mobile and Industrial. Investment considerations for investors include: monitoring Life Sciences’ ramp trajectory (bioprocessing and cell/gene therapy modules), NAPA and Medica activities’ commercialization timing, and the cadence of end-market demand in aerospace/defense, dust collection in Europe, and utility-scale projects in industrials. Overall, a constructive outlook predicated on continued price discipline, operational leverage, and selective capital allocation to Life Sciences and Industrial Services.