In a gloomy economic environment, robust, estimate-beating numbers give investors reason to cheer. Filters and exhaust products maker Donaldson (NYSE: DCI) is one such company. It recently reported a 29% jump in its fourth-quarter earnings.

So, how did that happen, and what's next for Donaldson?

The numbers
Revenues jumped 21% from the year-ago quarter to $625 million, as sales in both its engine and industrial products segments grew on the back of higher demand in most of the regions. Organic (base) revenues grew 13%, while currency translations contributed another 8% to the top line. Strengthening demand in markets like construction, agriculture, mining, and trucking boosted Donaldson's sales.

Higher raw material costs prevented the gross margin from improving in spite of higher revenues. The margin nevertheless remained at around 36%, the same level as last year's. Strong top-line growth helped Donaldson's net income surge 29% to $65.8 million.

Even truck builds seem to be on the higher side now. Take a clue from Cummins (NYSE: CMI) on this. The company's last quarter was good primarily because of higher truck engine shipments. And sales in its components segment, which provides filtration products, surged by a huge 42% on higher demand.

For Donaldson, which already boasts of a strong customer base including big names like Deere (NYSE: DE) and Caterpillar (NYSE: CAT), among others, higher truck builds will only add to demand for its new as well as replacement filters.

Reaching out
Donaldson has been expanding its business globally. It continues to spend on the liquid filtration product lines expansion it had embarked upon last year.

The Minneapolis-based company's focus on emerging markets is also noteworthy. It recently completed work in its new labs in China and India, and is building a new air filter plant in Mexico, targeting the rapidly growing Latin American region.

However, Donaldson is not the only company targeting emerging markets. These markets all contributed to rival Pall's (NYSE: PLL) sales growth last quarter, and the company has recently announced plans of acquiring its Brazilian distributor.

Similarly, filtration company Clarcor's (NYSE: CLC) second-quarter bottom line was primarily boosted by strong filter sales in China, where the company is expanding further. Even Cummins reported record sales in the emerging markets in its second quarter.

Overall, Donaldson's capital expenditures stood at $17 million in the fourth quarter. With a low total debt-to-equity ratio of 28.5%, a high interest coverage ratio, and a big cash stockpile, Donaldson looks pretty well placed to take up further expansion plans.

The Foolish bottom line
Donaldson's line of business seems to be looking at a bright future, as stricter emission standards and demand for its products is directly connected. Donaldson's modest yield should also whet your dividend appetite. Looks like a stock worth watching.

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