Portfolio: Zacks Earnings Certain Core

Donaldson operates a resilient “razor-blade” business model as the global leader in filtration systems across mobile, industrial, and life sciences markets. The company generates highly predictable recurring revenue (60-65% from replacement filters), maintains market-leading technology, and serves mission-critical applications where filter failure carries severe consequences. FY2025 delivered record $3.7B revenue and 15.7% operating margins. The recent $512M share buyback completion and 55 consecutive years of dividend payments demonstrate exceptional capital allocation.​

Management guides FY2026 to record $3.8B sales (+3%) with operating margins expanding to 16.4% (70bps improvement) and EPS growth of 9% on modest revenue gains—evidencing strong operating leverage. Life Sciences segment and mining/construction recovery provide upside catalysts. Overall, this is exactly the type of business we like: a wide moat, high ROIC business with durable earnings power and highly visible recurring revenue, and a capital return program that consistently buys back shares over time.