What’s Pushing Donaldson Company, Inc. (DCI) Toward Record Highs?

Donaldson faces two big risk factors. One comes from the fact that it counts Caterpillar Inc. (NYSE:CAT) as a major customer, with sales to the heavy-equipment maker accounting for slightly less than 10% of Donaldson’s net sales over the past three fiscal years. Caterpillar Inc. (NYSE:CAT) has faced difficulties recently due to the drop in commodities prices affecting its mining-equipment business as well as general macroeconomic trends, and that could hurt Donaldson’s business with the company.

The other comes from competitors. Cummins Inc. (NYSE:CMI) is a vertically integrated giant within the industry, offering filtration systems as part of its overall production of engines, and it has been a big innovator in the increasingly popular natural-gas-engine segment. Meanwhile, Pall Corporation (NYSE:PLL) also focuses on filtration systems, with a broad reach that includes everything from traditional industrial applications to its Oenoflow wine-filtering system.

In Donaldson Company, Inc. (NYSE:DCI)’s quarterly report, watch closely to see if the company is on track to meet its earlier projections for the fiscal year. On the whole, though, Donaldson’s opportunity is a longer-term play on the growth of the industrial sector worldwide, and it will take a revival in the global economy for the company to maximize its profits in the long run.

The article What’s Pushing Donaldson Toward Record Highs? originally appeared on Fool.com and is written by Dan Caplinger.

Motley Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter @DanCaplinger. The Motley Fool recommends Cummins. The Motley Fool owns shares of Cummins.

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