Dorman Products ((DORM)) has held its Q3 earnings call. Read on for the main highlights of the call.
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Dorman Products’ recent earnings call conveyed a generally positive sentiment, highlighting strong revenue and margin growth. The company has effectively implemented pricing strategies and diversified its supplier base, which has significantly boosted its earnings per share (EPS). However, challenges persist, particularly due to tariff-related impacts on cash flow and struggles within specific segments like Heavy Duty and Specialty Vehicles.
Strong Revenue Growth
Dorman Products reported consolidated net sales of $544 million for the third quarter, marking a 7.9% increase year-over-year. The Light Duty segment was a standout performer, with net sales rising by 9% compared to the same period last year.
Robust Margin Expansion
The company achieved an adjusted operating margin of 20.5% for Q3 2025, which is a 340 basis point improvement over the previous year’s third quarter. Additionally, the adjusted gross margin rose to 44.4%, reflecting a 390 basis point increase from last year.
EPS Growth
Dorman Products saw a 34% year-over-year increase in adjusted diluted EPS, reaching $2.62. This growth was attributed to revenue growth, margin expansion, and the timing dynamics of pricing and costs related to tariffs.
Supplier Diversification Initiatives
The company’s efforts to reduce its reliance on Chinese suppliers to 30% to 40% by the end of 2025 have contributed to margin improvements, showcasing a strategic move towards supplier diversification.
Tariff-Related Challenges
Tariff-related pricing actions have impacted Dorman’s cash flow, resulting in an operating cash flow of $12 million and a free cash flow of $2 million for the quarter. The company anticipates tariffs will continue to affect gross margins in the fourth quarter.
Heavy Duty Segment Challenges
While net sales in the Heavy Duty segment grew by 6% year-over-year, market conditions have continued to exert pressure, leading to flat margins due to lower manufacturing productivity.
Specialty Vehicle Segment Struggles
The Specialty Vehicle segment experienced relatively flat top-line growth year-over-year, facing ongoing market pressures such as weak consumer sentiment from tariffs and high interest rates, which have impacted operating margins.
Forward-Looking Guidance
Dorman Products provided guidance reflecting a strong performance in the first nine months of the year. The company reaffirmed its net sales growth forecast of 7% to 9% for 2025, with adjusted diluted EPS expected to range from $8.60 to $8.90, representing a 21% to 25% increase compared to the previous year. Despite the anticipated reduced gross margin in the fourth quarter due to tariffs, Dorman remains confident in its ability to deliver strong year-over-year growth.
In conclusion, Dorman Products’ earnings call highlighted a robust financial performance with significant revenue and margin growth, driven by strategic pricing and supplier diversification. However, the company continues to face challenges from tariffs and specific segment struggles. Looking ahead, Dorman remains optimistic about its growth prospects, despite the uncertainties posed by trade dynamics.