Shares of Donaldson Company (DCI 1.72%) were up nearly 24% this year through mid-February. Investor sentiment waned as earnings approached, and the stock dropped 18.2% at its lowest point this week, soon after its earnings were released on the morning of Feb. 26.
Donaldson delivered record numbers for its second quarter of fiscal 2026, but they fell short of analysts' estimates. Even projections of a record year ahead couldn't save the stock price from falling. Here's why.
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Why is Donaldson stock falling?
Donaldson's sales volumes dipped in Q2 as sales of on-road equipment fell, primarily because of lower global truck production and volume declines in aerospace and defense. The company, however, still reported 3% revenue growth, driven by better pricing and favorable foreign currency translation. Its operating margin dipped slightly from 14.4% to 13.2%.
Donaldson also trimmed its fiscal 2026 adjusted earnings per share guidance to a range of $3.93-$4.01 per share, down from the previous range of $3.95-$4.11 a share, signaling ongoing near-term challenges. While life sciences remains a bright spot, project timings in aerospace and defense, and weakness in trucking are expected to hurt sales.
Because the new midpoint is below consensus estimates, Donaldson stock plunged after earnings.
NYSE: DCI
Key Data Points
Why this drop could be an opportunity to buy
Those numbers aren't nearly as bad as even the revised guidance points at a record 2026. Moreover, Donaldson recently announced plans to acquire Facet for $820 million in cash and debt.
Facet specializes in filtration solutions for the aerospace and defense industries and power generation. Importantly, Facet also caters to mission-critical industries, deriving a quarter of its sales from military applications across aviation, marine, and land. Facet should also significantly expand Donaldson's international footprint, as it generates over 40% of its sales outside North America.
Donaldson will pause its share repurchase program for the second half of 2026 to fund the acquisition, but that's not a bad thing. Facet should add substantial value to Donaldson's business, which is why investors shouldn't write off this industrials stock just yet. In fact, a dip could even be an opportunity to buy now.
