Writing about leading filtration company Donaldson (NYSE:DCI) makes me feel kind of like an annoying mattress salesman. You know when you walk into the showroom and he shows you a nice, reliable model that's plushy and loaded with coils, but it's obviously not selling at a great price? Well, Donaldson's somewhat disappointing quarter may have finally opened the way to a sale price on this showroom-quality company.
Before you ask me to show you what else I've got, consider how strong a performer this company is. Donaldson hasn't turned in a year with sub-20% returns on equity in more than a decade. Its competitors, Pall (NYSE:PLL) and Cummins (NYSE:CMI), can't make such a claim. Nor can well-known customers General Electric (NYSE:GE) or Caterpillar (NYSE:CAT). Donaldson is good at delivering the numbers, and it's so consistently good that it is usually rewarded with an above-market earnings multiple.
The company's shares took a slight hit on Wednesday on softer margins in the fiscal third quarter. Sales and net income were up, as usual -- 12.6% and 8.4%, respectively. Those numbers, however, were boosted by foreign currency translation and tax benefits. Net income, in particular, would have shown a decline without the tax lay-up. That's pretty convenient timing, I have to say.
Some of the quarter's weakness stemmed from a softening in the transportation products business, where sales dropped 18.7%. The company foresaw this downturn as an inevitable result of the transport companies' rush to beat out the imposition of stricter diesel emissions standards in January.
The industrial products segment, on the other hand, was up 21%. Sales here were apparently more robust than anticipated, and the company struggled to expand to meet demand, which also crimped margins.
Donaldson didn't buy back any stock in the quarter, and I don't blame it. After a few more quarters like this, maybe Mr. Market will finally throw a real sale on the shares. Until then, value seekers won't be jumping up and down on their mattresses with glee.
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Fool contributor Toby Shute doesn't own shares in any company mentioned. The Motley Fool has a disclosure policy.
