Shares of Dorman Products (NASDAQ: DORM) fell 14.3% as of 3 p.m. ET on Tuesday after the auto products company announced weaker-than-expected quarterly results and lowered its full-year outlook.
Dorman’s third quarter revenue grew 18% year over year to $488.2 million, which translated into a 20% increase in adjusted non-GAAP (generally accepted accounting principles) earnings per share to $1.40 . Analysts on average had expected adjusted earnings of $1.59 per share on about the same revenue.
Dorman’s third-quarter results were weaker than they appeared
Looking deeper into Dorman’s quarter, growth was largely driven by the company’s purchase of SuperATV, the powersports aftermarket leader, late last year; sales growth excluding acquisitions was closer to 6%. Management noted that the SuperATV integration “continues to progress well and is substantially complete.”
While Dorman’s revenue results looked decent on the surface and were in line with expectations, the company also pointed out some potential problems under the hood.
“While we were pleased with the revenue growth in the third quarter, we experienced weaker demand than we expected due to a number of factors, including uneven performance from some of our larger lightweight customers,” said Kevin Olsen, CEO of Dorman.
About lowering expectations in the face of weaker demand
After linking this softer demand to the current uncertain macroeconomic environment, Dorman lowered its full-year 2023 outlook and called for net sales growth 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 guidance for a range of $5.15 to $5.35 per share.
Ultimately, Dorman is far from alone in lowering its full-year outlook due to softer demand trends and an uncertain macro environment. But it’s no surprise that stocks are reacting in kind today. So until these trends show signs of abating, it’s hard to blame investors for putting their money to work elsewhere.
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