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01/11 14:01
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call highlights strong financial performance with significant improvements in EBIT, net income, and free cash flow. The company is executing cost savings and operational efficiencies, with a positive outlook for Light Vehicle markets. Shareholder returns are substantial, and management is confident in achieving 2026 targets. Despite some uncertainties in the Commercial Vehicle market and EV program delays, the overall sentiment is positive, supported by strategic initiatives and financial metrics.
Sales for Q3 2025 $1.917 billion, up $20 million compared to Q3 of last year. This reflects recoveries in currency benefits offsetting the impact of lower demand.
Adjusted EBITDA for Q3 2025 $162 million, an improvement of $51 million year-over-year. Margin expanded by 260 basis points to 8.5%, driven by cost-saving actions and operational efficiencies.
EBIT for Q3 2025 $53 million, improved significantly from a loss of $8 million in the prior period.
Net income attributable to Dana for Q3 2025 $13 million, compared with a loss of $21 million in Q3 of last year, a positive swing of $34 million.
Adjusted free cash flow for Q3 2025 $101 million, a $109 million improvement compared to the prior year, driven by higher profitability and lower working capital requirements.
Net interest expense for Q3 2025 $44 million, increased by $11 million due to higher borrowings and modestly higher rates.
Income tax for Q3 2025 A benefit of $2 million, down $16 million from last year, benefiting from positive adjustments to the carrying value of deferred tax assets.
Working capital improvement for Q3 2025 Improved by $76 million, reflecting better inventory management and timing of receivables and payables.
Capital spending for Q3 2025 $59 million, up $16 million year-over-year as investments in new programs to support backlog continued.
EV program cancellations: There have been some supplier or EV program cancellations, and charges were taken in the quarter associated with these cancellations. Recovery is expected in the fourth quarter.
Off-Highway divestiture: The divestiture remains on track and is expected to close later in the fourth quarter. Regulatory approvals are nearly complete, with one minor European country pending.
Cost savings: The company is on track to deliver $310 million in cost savings for the year, with $73 million realized in the quarter. This has contributed to improved financial performance and operational efficiencies.
Tariff impact: Tariff-related headwinds have reduced, with minimal impact in Q3. Full-year tariff charges are lower than previously anticipated.
Operational efficiencies: Adjusted EBITDA improved by $51 million year-over-year, driven by cost-saving actions and operational efficiencies. Margins expanded by 260 basis points to 8.5%.
Share repurchase program: The company repurchased nearly 30 million shares, representing over 20% of shares outstanding, and plans to complete the balance of the share repurchase soon.
Growth strategy: Despite some deterioration in backlog due to EV program cancellations, the company has gained market share and won incremental programs. An analyst call is planned in January to discuss the revised backlog.
Volume softness in CV North America and Brazil: The company is experiencing volume softness in Commercial Vehicle (CV) markets in North America and Brazil, which could negatively impact financial performance.
EV program cancellations: There have been cancellations of some Electric Vehicle (EV) programs, leading to charges in the quarter. This could affect future growth and strategic objectives in the EV market.
Production disruptions: Production disruptions at certain customers, including a 5-week downtime at JLR, have negatively impacted sales and operations.
Commercial Vehicle market deterioration: The Commercial Vehicle market in North America and Brazil continues to deteriorate, posing a challenge to revenue and profitability.
Higher borrowing costs: Net interest expense increased due to higher borrowings and modestly higher rates, which could strain financial resources.
Operational impacts in thermal products business: Significant operational impacts within the thermal products business, including battery cooling, are affecting profitability.
Tariff-related profit headwinds: While tariff recoveries have improved, there are still profit headwinds expected in the future, which could impact margins.
Onetime costs for cost-saving programs: Onetime costs related to cost-saving programs have increased, which could temporarily strain cash flow.
Lower demand in traditional Commercial Vehicle markets: Lower demand in traditional Commercial Vehicle markets is expected to reduce sales and profitability.
Backlog deterioration due to EV program issues: The backlog has deteriorated due to EV program cancellations, deferrals, or lower volumes, which could impact long-term growth.
Improving Business Performance: The company expects business performance to accelerate in the fourth quarter due to completed restructuring initiatives turning from headwinds to tailwinds.
Cost Savings: Dana is on track to deliver $310 million in cost savings for the year, with quicker realization helping uplift the outlook. The full-year target for cost savings has been increased to $235 million.
Off-Highway Divestiture: The divestiture remains on track and is expected to close in the fourth quarter, with regulatory approvals nearly complete.
Share Repurchase Program: The company has repurchased nearly 30 million shares, representing over 20% of shares outstanding, and expects to complete the balance of the share repurchase in the next month.
Tariff Recovery: The tariff recovery rate has improved to the upper 80%, reducing headwinds. The company expects to recover the majority of tariff-related profit headwinds next year.
Light Vehicle Demand: Light-truck demand remains stable, with minimal production interruptions expected in the fourth quarter.
Commercial Vehicle Outlook: Deterioration in North America and Brazil is expected to continue, but the company has factored this into its full-year guidance.
Full-Year Guidance Update: The full-year sales guidance for continuing operations is approximately $7.4 billion, with adjusted EBITDA expected to be $590 million at the midpoint. Adjusted free cash flow is anticipated to be $275 million at the midpoint.
Margin Outlook: The company is targeting 10% to 10.5% margins for 2026 and expects fourth-quarter margins to be within or slightly above this range.
Growth and Backlog: Despite some deterioration in backlog due to EV program cancellations and deferrals, the company continues to win new business and plans to update its backlog in January 2026.
Share Repurchase Program: In terms of our capital returns, you'll see in our note, we talked about buying between $100 million and $150 million of shares in the third quarter. We actually bought more than that $9.5 million or 7% of our shares outstanding. We have had a 10b5 plan in place throughout the quarter. And as we sit here today, we've bought nearly 30 million shares or just over 20% of our shares outstanding and we expect to complete the balance of the share repurchase here over the next month or so.
Capital Return Commitment: In terms of our return of capital to shareholders, we're committed to the $600 million this year.
The earnings call highlights strong financial performance with significant improvements in EBIT, net income, and free cash flow. The company is executing cost savings and operational efficiencies, with a positive outlook for Light Vehicle markets. Shareholder returns are substantial, and management is confident in achieving 2026 targets. Despite some uncertainties in the Commercial Vehicle market and EV program delays, the overall sentiment is positive, supported by strategic initiatives and financial metrics.
The earnings call presents a mixed outlook. Financial metrics show improvement in cost savings and shareholder returns, but guidance is weak, particularly in the Off-Highway segment. The Q&A highlights positive aspects like tariff recovery and margin improvements, yet market conditions are uncertain. The lack of commitment to a special dividend and unclear management responses raise concerns. Overall, the sentiment is balanced, leading to a neutral stock price prediction.
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