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Filtering the air and fluids associated with many industrial processes protects sensitive machinery and addresses a variety of important health and safety concerns. A leading provider of the systems used to deal with a broad spectrum of such problems is headquartered in Minneapolis.
Donaldson Company (NYSE: DCI) manufactures filtration systems. The Engine Products segment makes air intake, exhaust and liquid filtration systems for the construction, industrial, mining, agricultural and transportation markets. The Industrial Products segment provides dust, fume and mist collectors and air filtration systems used in industrial gas turbines, computer disk drives and manufacturers' clean rooms. Caterpillar (NYSE: CAT) accounts for over 10% of Donaldson's sales.
The company pleased investors early in the week, when it reported fiscal Q4 EPS of 53 cents and revenues of $524.7 million. Analysts had been looking for 49 cents and $500.6 million. Management also predicted FY08 EPS of $1.92-2.01 ($1.97 consensus).
The stock popped on the news and has since begun forming a bullish "pennant" consolidation pattern. Equities frequently exit pennants moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.
Brokers recommend the shares with two "strong buys," one "buy" and four "holds." The stock's EPS Growth rate (23.26%), Return on Assets (11.95%), Return on Investment (18.23%) and Return on Equity (24.77%) compare favorably with industry, sector and S&P 500 averages.
Institutional investors hold about 74% of the outstanding shares. The stock is one of those used to calculate the S&P 400 MidCap Index. Over the past 52 weeks, it has traded between $33.60 and $44.59. A stop-loss of $35.75 looks good here.
Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.
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