Donaldson Company ( DCI), a filtration systems manufacturer, reported flat second-quarter earnings, hit by poor revenue growth. The company earned $26.9 million, or 32 cents a share, in the quarter ended Jan. 31, 2006, compared with $26.7 million, or 31 cents a share, a year ago. Analysts surveyed by Thomson First call were expecting earnings of $28 million, or 33 cents a share in the most recent quarter. Second-quarter revenue rose 1.2% from a year ago to $392.9 million. Analysts were expecting revenue of $408.5 million in the most recent quarter. The Minneapolis-based company expects to earn $1.47 a share to $1.57 a share in 2006, including 2 cents a share to 3 cents a share of options expense. Analysts were forecasting earnings of $1.53 a share. "Our operating margin improved to 10.2 percent year-to-date from 9.6 percent last year, despite absorbing $2.2 million, or $.02 per share, of stock option expenses into operating profits this year," the company said. "Donaldson is running very well, with our continued focus on cost reduction efforts offsetting higher commodity prices and driving the improvement in our profit margins. We reduced our full year sales outlook mainly due to currency translation since the dollar is currently weaker against the Euro and Yen than it was in the second half of last year. However, we expect continued positive year-over-year sales growth and for operating margins to continue at these improved levels, giving us confidence in delivering our 17th consecutive year of record earnings." Second-quarter gross profit rose 3.1% to $124.8 million, compared with $121 million, a year ago. Gross margin increased 61 basis points to 31.8%, compared with 31.2%, a year ago. Operating income rose 2.2% to $37.8 million, compared with $37 million, a year ago. Operating margin remained relatively flat at 9.6%. By segment, fourth-quarter revenue from engine products rose three percent from a year ago to $226.6 million. Revenue from industrial products segment fell two percent from a year ago to $166.3 million. Total order backlog rose 10% from a year ago and six percent from the first quarter to $459 million.