Donaldson: Looks Like the Streak Is Over

Today is a sad day for lovers of high-quality stocks. Donaldson (DCI) lowered its 2009 EPS forecast to a range of $1.70 to $1.90, which means that the company will almost certainly end its 19-year streak of delivering record earnings.

Donaldson isn’t very well known, but it’s a remarkable company. Their market cap is about $2 billion and they’re in the S&P 400 Mid-Cap Index (^MID). Donaldson is in the filtration business, which is about as dull as they come.

Last year, the company earned $2.12 a share and the outlook for this year (the fiscal year ends in July) was a range of $2.16 to $2.36. So even before today, the streak looked to be in jeopardy.

For the second quarter, Donaldson earned 43 cents a share, which was a mere penny a share more than last year’s Q2. Net income was actually down, but the company has fewer shares outstanding.

I’m not particularly worried about Donaldson. I don’t think they’re in any more trouble than anyone else. I was also happy to see this nugget from their press release:

In addition, since a significant portion of our pay is 'at risk' and paid based on our actual financial performance, executive officer compensation is expected to be reduced by 30 to 50 percent this year due to lower incentive payouts. In addition, officer base salaries have been frozen at January 2008 levels.

Here's a look at Donaldson's stock along with its EPS line in blue. The two axes are scaled at 20 to 1.

Here's the earnings streak:

Year

.............

Sales

.................

EPS

1990............$422.9...............$0.19

1991............$457.7...............$0.21

1992............$482.1...............$0.23

1993............$533.3...............$0.26

1994............$593.5...............$0.30

1995............$704.0...............$0.37

1996............$758.6...............$0.42

1997............$833.3...............$0.50

1998............$940.4...............$0.57

1999............$944.1...............$0.66

2000............$1,092.3............$0.76

2001............$1,137.0............$0.83

2002............$1,126.0............$0.95

2003............$1,218.3............$1.05

2004............$1,415.0............$1.18

2005............$1,595.7............$1.27

2006............$1,694.3............$1.55

2007............$1,918.8............$1.83

2008............$2,232.5............$2.12

Comments

[granger:]

I agree sad, a great company and I love winning streaks.

But, I am happy. This has been on my watch list for a very long time.

Started nibbling on Friday in the mid 24's. This will take time, but I plan to build on any further weakness. DCI will be one of my portfolio cornerstones.

I look to be a shareholder for many years to come.

Feb 28 04:50 PM