Donaldson manufactures filtration systems designed to eliminate contaminants from air liquids, with the bulk of the company's applications addressing intake/exhaust systems and liquid-filtration systems. About 56% of DCI's business is engine product-based, 44% industrial products-based.
That's hardly a glamorous, famed-filled business but Donaldson doesn't mind: it's operations span the U.S., Europe, Asia and other regions, with 30 strategically-located facilities. Donaldson's shares gained 18 cents to end at $41.89 in Tuesday afternoon trading.
Further, although U.S. market softness is expected to continue through at least the end of 2007, DCI stands to gain from emerging market nations' continued investment in infrastructure, construction, mining, and agriculture. Analysts are keeping an eye on Donaldson's raw material / core component costs, but that doesn't negate DCI's advantageous position for the delivery of in-demand goods to emerging market customers. The Reuters F2008/F2009 EPS consensus estimates for DCI are $1.99/$2.26.
[Note: Technical analysis agnostics stop reading here; all others continue.]
Technically, Donaldson's chart looks strong. After straddling the 50-day moving average for months, the stock is now above it and has been above its 200-day moving average for about 4 months. Further, an August 2007 dip did not violate a long-term uptrend. DCI's p/e of 22 is high, but not outlandish.
Stock Analysis: Donaldson is a moderate-risk stock not suitable for low-risk investors. Investors with an investment horizon longer than 1 year should be rewarded from DCI's shares. Sell / Stop Loss: $28.
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