Donaldson Co Inc DCI

Donaldson Looks to Spur Profitable Growth Through Investments in New Life Sciences Segment

Donaldson, a leading manufacturer of air and liquid filtration systems, has built a narrow moat around its large installed base of equipment coupled with a razor-and-blade business model that continues to generate a relatively steady and high-margin stream of recurring revenue from aftermarket parts and consumables. The firm generates an increasing portion of its sales from proprietary solutions, which enjoy higher margins and greater customer retention rates. As a result, recurring revenue has steadily increased, from roughly 50% in 2012 to around 65% in fiscal 2025. We expect this trend to continue as the company scales its new life sciences segment both through organic investment and acquisitions.