DORM

Why Dorman Products Stock Dropped Today

Shares of Dorman Products (NASDAQ: DORM) were down 14.3% as of 3 p.m. ET Tuesday after the automotive products company announced weaker-than-expected quarterly earnings and lowered its full-year outlook.

Dorman's third-quarter revenue grew 18% year over year, to $488.2 million, translating to a 20% increase in adjusted non-GAAP (generally accepted accounting principles) earnings per share to $1.40. Analysts, on average, were expecting adjusted earnings of $1.59 per share on roughly the same revenue.

Dorman's Q3 results were weaker than they seemed

Digging deeper into Dorman's quarter, growth was largely driven by the company's purchase of power sports aftermarket leader SuperATV late last year; revenue growth excluding acquisitions was closer to 6%. Management noted the integration of SuperATV "continues to go well and is substantially complete."

Though Dorman's top-line results looked decent at a glance, however, arriving in line with expectations, the company also pointed out some potential issues under the hood.

"While we were pleased with third-quarter sales growth, we did experience softer demand than we expected due to a number of factors, including the uneven performance of some of our larger light-duty customers," elaborated Dorman CEO Kevin Olsen.

On lowering guidance amid softer demand

After coupling that softer demand with today's uncertain macroeconomic environment, Dorman reduced its full-year 2023 outlook to call for growth in net sales of 11% to 12.2%, a range of $1.925 billion to $1.945 billion. Previous guidance called for 2023 net sales of $1.95 billion to $2 billion. Dorman also lowered its full-year earnings guidance to a range of $4.35 per share to $4.55 per share, down from its previous outlook for a per-share range of $5.15 to $5.35.

In the end, Dorman is far from alone in reducing its full-year outlook on softer demand trends and an uncertain macro environment. But it's no surprise to see the stock responding in kind today. As such, until these trends show signs of abating, it's hard to blame investors for putting their money to work elsewhere.

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Steve Symington has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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