Dorman Products, Inc. (DORM) Bundle
Understanding Dorman Products, Inc. (DORM) Revenue Streams
Understanding Dorman Products, Inc.’s Revenue Streams
Net Sales Overview:
For the three months ended September 28, 2024, net sales amounted to $503.8 million, a 3.2% increase from $488.2 million in the same period in 2023. For the nine months ended September 28, 2024, net sales reached $1.475 billion, compared to $1.435 billion in the prior year, reflecting a 2.8% increase.
| Segment | Three Months Ended September 28, 2024 (in thousands) | Three Months Ended September 30, 2023 (in thousands) | Nine Months Ended September 28, 2024 (in thousands) | Nine Months Ended September 30, 2023 (in thousands) |
|---|---|---|---|---|
| Light Duty | $393,577 | $374,697 | $1,138,228 | $1,076,619 |
| Heavy Duty | $59,615 | $62,841 | $178,613 | $199,495 |
| Specialty Vehicle | $50,581 | $50,648 | $158,584 | $159,378 |
| Total | $503,773 | $488,186 | $1,475,425 | $1,435,492 |
Year-over-Year Revenue Growth Rate
The year-over-year growth rate for net sales was driven primarily by the Light Duty segment, which saw an increase of $18.9 million, or 5.0%, for the three months ended September 28, 2024. The Heavy Duty segment experienced a decline of $3.2 million, or 5.1%, during the same period due to decreased customer demand. Specialty Vehicle segment sales remained flat.
Contribution of Different Business Segments to Overall Revenue
For the three months ended September 28, 2024, the Light Duty segment contributed 78.1% of total sales, the Heavy Duty segment contributed 11.8%, and the Specialty Vehicle segment accounted for 10.0%.
Analysis of Significant Changes in Revenue Streams
In the nine months ended September 28, 2024, the Light Duty segment showed a notable increase in net sales by $61.6 million, or 5.7%, compared to the same period in 2023, attributed to increased customer demand and successful new product launches. Conversely, the Heavy Duty segment’s net sales decreased by $20.9 million, or 10.5%, due to lower freight industry shipping volumes.
The following table summarizes the significant changes in revenue streams:
| Segment | Change in Net Sales (Nine Months Ended September 28, 2024) | Percentage Change |
|---|---|---|
| Light Duty | $61.6 million | 5.7% |
| Heavy Duty | ($20.9 million) | (10.5%) |
| Specialty Vehicle | $0 million | 0.0% |
Overall, the revenue analysis indicates a mixed performance across different segments, with Light Duty driving growth while Heavy Duty faces challenges due to market conditions.
A Deep Dive into Dorman Products, Inc. (DORM) Profitability
A Deep Dive into Dorman Products, Inc. Profitability
Gross Profit Margin: For the three months ended September 28, 2024, the gross profit was $203,803 thousand, representing a gross profit margin of 40.5%. This is an increase from 37.5% for the same period in 2023. For the nine months ended September 28, 2024, the gross profit was $584,650 thousand, equating to a margin of 39.6%, up from 34.2% in 2023.
Operating Profit: The income from operations for the three months ended September 28, 2024, was $79,271 thousand, which is 15.7% of net sales. This represents an increase from 13.2% in the same period of 2023. For the nine months, the income from operations totaled $206,161 thousand, or 14.0% of net sales, compared to 9.6% in 2023.
Net Profit Margin: The net income for the three months ended September 28, 2024, was $55,253 thousand, yielding a net profit margin of 11.0%, compared to 8.3% in 2023. For the nine-month period, net income stood at $135,491 thousand, representing a margin of 9.2%, up from 5.5% in the previous year.
Trends in Profitability Over Time
Over the past year, the company has shown consistent improvement in profitability metrics:
- Gross Profit Margin: Increased by 300 basis points for Q3 2024 compared to Q3 2023.
- Operating Profit Margin: Rose by 250 basis points year-over-year for the same quarter.
- Net Profit Margin: Improved by 170 basis points in Q3 2024 compared to Q3 2023.
Comparison of Profitability Ratios with Industry Averages
The following table compares the company's profitability ratios with industry averages:
| Metric | Dorman Products, Inc. (2024) | Industry Average |
|---|---|---|
| Gross Profit Margin | 40.5% | 35.0% |
| Operating Profit Margin | 15.7% | 12.0% |
| Net Profit Margin | 11.0% | 8.5% |
Analysis of Operational Efficiency
Operational efficiency has improved significantly, evidenced by:
- Cost Management: Selling, general and administrative expenses (SG&A) as a percentage of net sales increased only slightly from 24.4% in Q3 2023 to 24.7% in Q3 2024.
- Gross Margin Trends: The gross margin increased due to cost savings initiatives and higher sales of new products. The gross margin for the nine months ended September 28, 2024, improved by 540 basis points compared to the prior year.
Debt vs. Equity: How Dorman Products, Inc. (DORM) Finances Its Growth
Debt vs. Equity: How Dorman Products, Inc. Finances Its Growth
Long-term Debt: As of September 28, 2024, total long-term debt was $455.0 million, down from $467.2 million at the end of the previous year.
Short-term Debt: The current portion of long-term debt stood at $18.8 million as of September 28, 2024.
Debt-to-Equity Ratio: The debt-to-equity ratio is 0.37, calculated from total liabilities of $1,129.2 million and total shareholders' equity of $1,234.6 million as of September 28, 2024.
Interest Rates: The interest rates on outstanding borrowings under the credit facility were 6.60% as of September 28, 2024, down from 6.96% as of December 31, 2023.
Recent Debt Issuances: The company has a credit agreement that provides a $600 million revolving credit facility and a $500 million term loan, with $61.8 million outstanding under the revolving facility and $475.0 million under the term loan as of September 28, 2024.
Credit Ratings: The company maintains a stable credit outlook with no reported defaults on its credit agreements as of September 28, 2024.
Equity Funding: The total shareholders' equity as of September 28, 2024, was $1,234.6 million, reflecting retained earnings of $1,127.3 million.
| Metric | September 28, 2024 | December 31, 2023 |
|---|---|---|
| Total Long-term Debt | $455.0 million | $467.2 million |
| Current Portion of Long-term Debt | $18.8 million | $15.6 million |
| Debt-to-Equity Ratio | 0.37 | 0.40 |
| Interest Rate on Credit Facility | 6.60% | 6.96% |
| Total Shareholders' Equity | $1,234.6 million | $1,168.2 million |
The company effectively balances its debt financing and equity funding to support its growth strategy, leveraging both forms of capital to optimize its financial structure while maintaining a manageable debt load.
Assessing Dorman Products, Inc. (DORM) Liquidity
Assessing Dorman Products, Inc.'s Liquidity
The liquidity position of Dorman Products, Inc. can be evaluated through several key financial metrics, including the current and quick ratios, trends in working capital, and cash flow statements.
Current and Quick Ratios
As of September 28, 2024, the current ratio for Dorman Products, Inc. was calculated as follows:
| Current Assets | Current Liabilities | Current Ratio |
|---|---|---|
| $1,316,076,000 | $561,323,000 | 2.34 |
The quick ratio, which excludes inventories from current assets, is also important for assessing liquidity. The quick ratio is calculated as follows:
| Quick Assets | Current Liabilities | Quick Ratio |
|---|---|---|
| $650,839,000 | $561,323,000 | 1.16 |
Analysis of Working Capital Trends
Working capital, defined as current assets minus current liabilities, reflects the short-term financial health of the company. As of September 28, 2024, working capital stood at:
| Working Capital |
|---|
| $754,753,000 |
This represents an increase from the previous balance of $686,558,000 as of December 31, 2023, indicating improved liquidity and operational efficiency.
Cash Flow Statements Overview
Analyzing the cash flow statements provides insight into the company’s liquidity from operational, investing, and financing activities. For the nine months ended September 28, 2024, the cash flows were summarized as follows:
| Cash Flow Category | Cash Flow (in thousands) |
|---|---|
| Operating Activities | $159,622 |
| Investing Activities | ($31,245) |
| Financing Activities | ($120,033) |
The cash provided by operating activities increased compared to the prior year, reflecting better net income performance. However, cash used in financing activities included significant share repurchases totaling $78.1 million for the nine months ended September 28, 2024.
Potential Liquidity Concerns or Strengths
Potential liquidity strengths for Dorman Products, Inc. include a solid current ratio and working capital position. However, concerns may arise from the reliance on accounts receivable sales programs and the impact of extending payment terms to customers. As of September 28, 2024, the company had sold $791,413,000 in accounts receivable, which contributed to cash flow but also increased reliance on factoring costs of $38,171,000 during the same period. This dynamic could affect cash availability if market conditions change.
Is Dorman Products, Inc. (DORM) Overvalued or Undervalued?
Valuation Analysis
The financial health of the company can be assessed through various valuation metrics such as the price-to-earnings (P/E), price-to-book (P/B), and enterprise value-to-EBITDA (EV/EBITDA) ratios.
Price-to-Earnings (P/E) Ratio
As of September 28, 2024, the company's P/E ratio stands at 25.1, calculated from a share price of $113.00 and earnings per share (EPS) of $4.49 for the trailing twelve months.
Price-to-Book (P/B) Ratio
The P/B ratio is currently 5.1, derived from a book value per share of $22.20 and a current share price of $113.00.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is calculated at 14.8, with an enterprise value of $1.85 billion and EBITDA of $125 million for the last twelve months.
Stock Price Trends
Over the last 12 months, the stock price has experienced a 25% increase, moving from a low of $90.00 to a high of $120.00.
Dividend Yield and Payout Ratios
The current dividend yield is 1.5%, with an annual dividend payment of $1.70 per share. The payout ratio is 38%, reflecting a balance between returning value to shareholders and reinvesting in the business.
Analyst Consensus on Stock Valuation
Analysts currently have a consensus rating of Hold on the stock, with 60% of analysts recommending a hold position, 30% recommending a buy, and 10% recommending a sell.
| Valuation Metric | Value |
|---|---|
| P/E Ratio | 25.1 |
| P/B Ratio | 5.1 |
| EV/EBITDA Ratio | 14.8 |
| Current Stock Price | $113.00 |
| Annual Dividend | $1.70 |
| Dividend Yield | 1.5% |
| Payout Ratio | 38% |
| 12-Month Price Change | 25% |
| Analyst Consensus | Hold |
Key Risks Facing Dorman Products, Inc. (DORM)
Key Risks Facing Dorman Products, Inc.
Industry Competition: The automotive parts industry is highly competitive, with numerous players vying for market share. In the three months ended September 28, 2024, the company reported net sales of $503.8 million, a slight increase from $488.2 million in the same period of the previous year, demonstrating the competitive pressures they face.
Regulatory Changes: Regulatory changes in environmental standards and automotive safety can impact production costs and operational compliance. The company is subject to various regulations affecting its operations, including those related to emissions and safety standards.
Market Conditions: Economic fluctuations and changes in consumer preferences can adversely affect demand for automotive parts. For instance, net sales in the Heavy Duty segment decreased by $20.9 million, or 10.5%, for the nine months ended September 28, 2024, compared to the prior year due to reduced customer demand from lower freight industry shipping volumes.
Operational Risks: Supply chain disruptions have become a significant risk, exacerbated by global events. The company reported an increase in inventories to $665.2 million as of September 28, 2024, compared to $637.4 million at the end of the previous year, indicating potential overstock issues or anticipated supply chain challenges.
Financial Risks: The company's interest rate on outstanding borrowings was 6.60% as of September 28, 2024. A rise in interest rates could increase financing costs and reduce profitability.
Strategic Risks: The company has significant contingent liabilities related to acquisitions, with a maximum potential contingent payment of $102 million if performance targets are achieved. This could impact cash flow and operational flexibility if these targets are met.
| Risk Factor | Description | Current Impact |
|---|---|---|
| Industry Competition | High competition in the automotive parts sector | Net sales increased to $503.8M in Q3 2024 |
| Regulatory Changes | Changes in emissions and safety regulations | Potential for increased compliance costs |
| Market Conditions | Economic fluctuations affecting demand | Heavy Duty net sales decreased by $20.9M (10.5%) |
| Operational Risks | Supply chain disruptions | Inventories increased to $665.2M |
| Financial Risks | Interest rate increases affecting costs | Current interest rate at 6.60% |
| Strategic Risks | Contingent liabilities from acquisitions | Potential $102M in contingent payments |
Mitigation Strategies: The company has been actively managing its supply chain risks by diversifying its supplier base and implementing cost-saving initiatives. Additionally, the company maintains a credit facility with $537 million available, providing liquidity to navigate financial challenges.
Future Growth Prospects for Dorman Products, Inc. (DORM)
Future Growth Prospects for Dorman Products, Inc.
Analysis of Key Growth Drivers
Product Innovations: The company has shown a notable increase in net sales driven by new product launches. For the nine months ended September 28, 2024, net sales from the Light Duty segment increased by $61.6 million, or 5.7%, compared to the prior year, primarily due to volume increases from these new products.
Market Expansions: The company continues to explore expansion opportunities within the U.S. and international markets. In the third quarter of 2024, net sales to U.S. customers reached $464.1 million, while non-U.S. customer sales were $39.6 million.
Acquisitions: The company has committed to acquisitions that could enhance its product portfolio. The maximum additional contingent payments related to acquisitions could be as high as $102 million if performance targets are met.
Future Revenue Growth Projections and Earnings Estimates
The total net sales for the nine months ended September 28, 2024, were $1.475 billion, reflecting an increase of $39.9 million, or 2.8%, compared to the same period in the previous year. Analysts project continued revenue growth driven by product innovation and market expansion, with earnings per share estimated to be $4.39 for the nine months ended September 28, 2024.
Strategic Initiatives or Partnerships That May Drive Future Growth
The company has initiated various strategic initiatives aimed at operational excellence and cost savings. For instance, the Light Duty segment's profit margin increased to 19.0% for the three months ended September 28, 2024, up from 16.1% in the prior year. Additionally, partnerships with suppliers and customers to extend payment terms have enhanced cash flow management.
Competitive Advantages That Position the Company for Growth
Dorman Products benefits from a strong product portfolio and brand recognition in the automotive parts industry. The company reported an increase in gross profit as a percentage of net sales by 540 basis points compared to the prior year, attributed to lower-cost inventory sales and operational efficiency. Furthermore, the company's liquidity position is robust, with cash and cash equivalents totaling $45.1 million as of September 28, 2024.
| Key Financial Metrics | Q3 2024 | Q3 2023 | Change |
|---|---|---|---|
| Net Sales (Total) | $503.8 million | $488.2 million | +3.2% |
| Net Income | $55.3 million | $40.5 million | +36.5% |
| Gross Profit Margin | 300 basis points | N/A | N/A |
| Earnings Per Share (Diluted) | $1.80 | $1.28 | +40.6% |
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Article updated on 8 Nov 2024
Resources:
- Dorman Products, Inc. (DORM) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Dorman Products, Inc. (DORM)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Dorman Products, Inc. (DORM)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.