Donaldson is a filtration technology company that just closed the largest acquisition in its history, an all-cash purchase of Facet Filtration completed early in calendar 2026. The deal converts the Industrial Solutions segment into a durable aerospace and defense franchise and repositions the portfolio toward the highest-margin end markets.
The dynamic under the surface is a margin recovery that had stalled through the first three quarters of fiscal 2026. Full-year adjusted operating margin reached 16.0 percent, up from 15.7 percent. The fourth quarter adjusted operating margin of 17.5 percent is the strongest print in recent company history. The question the next four quarters resolve is whether that margin profile holds after a full year of Facet run-rate expenses and amortization.
Fiscal 2026 closed with sales up 5.3 percent. GAAP EPS reached $3.85 on the strength of a record fourth quarter. Management then guided fiscal 2027 EPS to a range centered on $4.30, its first all-time-high guidance in both sales and earnings. The open question is whether a capital structure now carrying roughly $1.4 billion of debt, versus a historically near-net-cash balance sheet, can still support the dividend, the buyback, and future M&A. The balance sheet answer is the one that separates the base case from the bear case.