Dorman Products Q3 Earnings Call Highlights

Key Points

• Record Q3 sales: Dorman Products reported third-quarter net sales of $562 million, up approximately 3% year over year, with growth across all three operating segments. Adjusted EPS fell to $2.08 from $2.62, primarily reflecting unfavorable tariff-related cost timing.
• Mixed segment performance: Light-duty sales increased 3% and heavy-duty sales rose 5%, while specialty vehicle sales grew 3%. DIY demand remained pressured, but professional-repair activity was more stable.
• Outlook narrowed: Dorman expects 2026 sales growth of 2% to 3% and adjusted EPS of $8.50 to $8.70, citing continued DIY softness and additional tariff-related price reductions. The company also repurchased $15 million of shares during the quarter, bringing year-to-date buybacks to a record $112 million.

Dorman Products NASDAQ: DORM reported record third-quarter net sales of $562 million, up approximately 3% from a year earlier, as volume growth in its light-duty and heavy-duty businesses offset pricing reductions in certain categories. The company said all three operating segments posted year-over-year sales growth.

Adjusted operating income was $89 million, with an adjusted operating margin of 15.8%, while adjusted EBITDA margin was 18.5%. Adjusted diluted earnings per share totaled $2.08, compared with $2.62 in the prior-year quarter. Management said the comparison reflected tariff-related pricing benefits in the third quarter of 2025 that were not yet accompanied by associated tariff costs.

Chairman, President and Chief Executive Officer Kevin Olsen said the company’s largely non-discretionary product portfolio continued to perform through varied market conditions. However, he noted that demand remained more pressured among do-it-yourself customers, while the company’s do-it-for-me, or professional-repair, business remained more stable.

Segment Results

Light-duty segment sales rose approximately 3% to $444 million, supported by the company’s DIFM-focused categories and channels. Year-to-date light-duty sales were up approximately 2%. The segment’s operating margin was 18.5%, down 520 basis points from the prior year, primarily because of the timing of tariff-related pricing and costs.

Olsen said point-of-sale trends at Dorman’s largest customers aligned with the segment’s sales growth in the quarter. Point-of-sale performance was up mid-single digits year to date, though DIY demand remained under pressure. The company said it continues to see favorable industry fundamentals, including higher vehicle miles traveled and an increasing share of light-duty trucks and SUVs in the vehicle population.

Dorman highlighted a new OE FIX four-wheel-drive locking hub actuator designed for certain Ford and Lincoln models. The company said its version uses an upgraded diaphragm material intended to provide greater durability than the original part.

Heavy-duty sales increased approximately 5% to $66 million, driven by higher volume and pricing in certain categories and channels. Year-to-date sales in the segment were up approximately 8%. Operating income margin was breakeven, which management attributed to the timing of higher tariff and shipping costs.

The trucking market remained pressured during the quarter, according to Olsen. While freight rates increased as capacity compressed, the company did not see a significant increase in freight tonnage. He said tonnage indicators have stabilized in recent months, and Dorman continues to see original-equipment dealers using aftermarket repair parts in their service centers.

Olsen said OE manufacturers still control roughly 60% of the heavy-duty aftermarket, compared with about 30% on the light-duty side, presenting an opportunity for aftermarket suppliers. Dorman recently introduced a windshield wiper arm that was new to the aftermarket as part of a broader wiper-related product offering.

Specialty vehicle sales rose approximately 3% to $52 million, supported by portfolio expansion and pricing actions in certain categories. Operating income margin increased 30 basis points to 13.1%, though higher freight costs weighed on the segment’s overall margin profile.

The company said new specialty vehicle sales grew significantly during the quarter, particularly for work-related utility machines and higher-end cab vehicles. At the same time, management said riders have reduced the frequency of recreational riding activities as higher fuel prices raise the cost of transporting and operating their vehicles. Dorman introduced a hard cab enclosure for the CFMOTO ZFORCE 800 during the quarter.

Margins, Cash Flow and Capital Returns

Chief Financial Officer Charles Rayfield said adjusted gross margin declined 500 basis points year over year to 39.4%. Adjusted selling, general and administrative expense as a percentage of sales declined 30 basis points to 23.6%.

For the first nine months of 2026, net sales totaled $1.64 billion, up approximately 3% from the prior-year period. Adjusted operating income was down 4% year over year, while adjusted diluted EPS was flat at $6.73.

Operating cash flow was $65 million in the third quarter, and free cash flow was $57 million. Rayfield said free cash flow was lower sequentially because the company reduced its factoring volume as cash on hand increased, a move that also reduced factoring expense.

Dorman repurchased approximately 115,000 shares for $15 million during the quarter at an average price of about $127 per share. Through the first nine months of the year, the company has spent a record $112 million on share repurchases. It had $348 million remaining under its authorization through 2027.

The company ended the quarter with approximately $283 million in net debt, $966 million of total liquidity and net leverage of 0.65 times adjusted EBITDA. Rayfield said capital allocation priorities remain investment in product development, potential acquisitions and opportunistic share repurchases.

Updated 2026 Outlook

Dorman narrowed its full-year outlook, forecasting net sales growth of 2% to 3% and adjusted diluted EPS of $8.50 to $8.70. The prior EPS outlook was $8.50 to $8.80.

Management said the sales outlook reflects continued softness in DIY demand and additional tariff-related price reductions expected in the fourth quarter. The company expects fourth-quarter growth to be driven primarily by volume from new product introductions and business wins.

The company continues to expect gross margin of approximately 40% in the fourth quarter and now expects full-year adjusted operating margin of 16% to 16.5%, at the upper end of its previous range. Dorman also expects an effective tax rate of 23.5% to 24% for the year.

Rayfield said price reductions that began during 2026 are expected to affect comparisons into the early part of 2027, though the company will also consider volume trends and other input costs in future pricing decisions.

About Dorman Products (NASDAQ:DORM)

Dorman Products, Inc develops, manufactures and distributes replacement and upgrade parts for automobiles, light-, medium- and heavy-duty trucks, and other vehicles. Its products are sold primarily through the automotive aftermarket, serving professional repair shops, retailers, distributors, e-commerce channels and do-it-yourself consumers.

The company offers a broad range of products, including engine, transmission, cooling, electrical, steering, suspension, braking, chassis and body components.

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