Filters maker Donaldson says 1Q profit falls as sales drop but beats Street view; shares rise

Donaldson 1Q profit falls but beats Street view

MINNEAPOLIS — Filtration systems maker Donaldson Co. said Wednesday its profit fell 28 percent in the fiscal first quarter as sales dropped amid weaker demand.

But the company beat a Wall Street forecast and raised its full-year profit estimate. Investors sent the shares sharply higher in after-hours trading.

The company, based in Minneapolis, earned $34.6 million, or 44 cents per share, in the quarter that ended Oct. 31. That is down from the $48 million, or 60 cents per share, it earned a year earlier.

Excluding a 1-cent restructuring charge, the company’s adjusted profit of 45 cents per share beat a 34-cent-per-share consensus estimate of analysts polled by Thomson Reuters. Analysts usually exclude one-time costs from consensus estimates.

Revenue fell 25 percent to $428.1 million from $573.3 million but still stopped analysts’ $423.2 million forecast.

The company said it expects 2010 profit to in a range of $1.75 to $1.95 per share on sales of $1.8 billion, well above Wall Street’s average prediction of $1.45 per share on $1.71 billion in sales.

Donaldson shares rose $3.17, or 7.7 percent, to $44.63 in after-hours trading Wednesday after closing at $41.46, up 9 cents from a day earlier.

The company said it expects second-quarter sales to drop year-over-year, but to see results in the second half of the year turn higher. It noted that its operating margin edged up to 12.3 percent from 12.2 percent, helped by cost cuts and sales mix.

Donaldson said it expects to see a modest increase in engine products sales to construction and mining equipment customers as they boost production rates to replenish inventory. Customer demand in the farm equipment market outside of North America is expected to continue its current decline.

The company is forecasting slightly lower sales for its aerospace and defense products division due to the slowdown in U.S. military activity in Iraq and the related drop in government procurement spending for major programs, such as the Blackhawk helicopter. Full-year sales of gas turbine products are expected to drop 25 to 30 percent due to the current slowdown in demand for large power generation projects as a result of lower electrical power needs amid the economic slump.