Earnings Recap — Q4 FY2026
CY Q3 2026 · Reported August 26, 2026 · Beat 5 of last 7 quarters
Donaldson Company, Inc. reported Q4 FY2026 revenue of $1.06B, a beat of 1.5% against consensus, and EPS of $1.15, a beat of 1.8%.
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Donaldson's fiscal 2027 guidance points to continued strength in power generation, with a robust order book extending into fiscal 2028, and strong demand in life sciences driven by data center AI buildout and liquid cooling. These trends support the thesis that AI infrastructure expansion is driving demand for filtration and cooling solutions across multiple end markets. The company's ability to grow in these areas could signal sustained investment in AI-related physical infrastructure.
Donaldson delivered record fourth quarter results with sales surpassing $1 billion for the first time, up 8% year-over-year, driven by volume including the Facet acquisition and pricing. Adjusted EPS rose 12% to $1.15, beating consensus, and operating margin reached an all-time high of 17.5%. Mobile Solutions sales grew 8% to $635 million with record pretax margin of 21.3%; Industrial Solutions sales grew 8% to $334 million, including $30 million from Facet, but pretax margin fell 450 bps to 16.4% due to Facet costs and power generation inefficiencies; Life Sciences sales grew 10% to $90 million with pretax margin up 660 bps to 11.9%. The company completed the largest acquisition in its history, Facet Filtration, on May 4, 2026, and reported $0.06 EPS dilution from Facet in the quarter.
Management guided fiscal 2027 to record sales of over $4.1 billion (up 7.5% at midpoint), with EPS of $4.22–$4.38 (up 8% at midpoint) including ~$0.12 of dilution from Facet. Operating margin is expected to expand 90 basis points to 16.6%–17.2%, driven by gross margin expansion from pricing, Facet's higher structural gross margin, and improved operational efficiency. The company expects power generation inefficiencies to fully recover by mid-fiscal 2027 and anticipates continued strength in aerospace & defense, power generation, and life sciences. Free cash flow conversion is guided to 95%–105%, with capex of $70–$90 million. Management also noted robust order volumes and healthy backlogs entering the year, and expects to resume share repurchases (~1% of shares outstanding).
“In the fourth quarter, sales surpassed $1 billion for the first time in company growing 8% above prior year, driven by higher volume, including the facet acquisition and pricing benefits.”
on Record quarterly sales
“We have already paid down over $100 million of facet related debt. Our leverage ratio is currently about 1.4 times net debt to EBITDA.”
on Balance sheet and deleveraging
“We are seeing really strong demand outlook on both sides. If you think about the disk drive business, it is really a combination of share and pricing the technology shift to HAMR, which is the next generation technology that has significantly more content per drive for us.”
on Life sciences growth drivers
Just starting with margin. Obviously, there is some seasonality here. In 4 q. The margins were a healthy, you know, 17.5%. As we look to, you know, fiscal 27, is there any underlying operational headwinds we should be aware of? Given the midpoint of the guide you know, closer to 17%.
Richard Lewis noted continued pressure in the industrial business in the first half, particularly from power gen facility in Mexico, with a meaningful step up in the second half. Bradley Pogalz added that normal seasonality is important, with about 57% of operating profit in the second half, and highlighted $22 million incremental amortization from Facet.
And then on facet, so there was a it was $0.06 dilutive here in Q4, and yet the fiscal 27 guidance only assumes about $0.12 for the full year. Or, you know, like, below that annualized rate. So, you know, what are the main drivers for this? Is it debt pay down, cost synergies? Purchase accounting step down?
Bradley Pogalz explained that the drivers are purchase accounting step-down and debt paydown. He noted that on a cash basis, Facet is accretive in fiscal 2027.
First 1, Richard, just on the mid teens organic growth guidance in Aerospace and Defense. Can you unpack what gives you confidence the supply chain issues will be resolved to enable that level of growth? And what is the timing we should be thinking about as to when those supply constraints are resolved?
Richard Lewis said the biggest challenge is ramping production at the new Illinois facility after closing the California facility. He expects it to take the first half of the year to work through the late position and return to normalcy. He noted broader supply chain issues are mostly under control.