Dana Overcomes Challenges With Q3 EPS Beat But Foresees $500M Sales Drop If No UAW Strike Resolution By Year's End

Dana Incorporated DAN reported third-quarter FY23 sales growth of 5% year-on-year to $2.669 billion, missing the consensus of $2.695 billion.

Adjusted EPS of $0.30 beat the analyst consensus of $0.13.

The revenue increase was driven by higher market demand, cost-recovery actions, and conversion of sales backlog, partially offset by the lower demand due to the UAW strike at two of its key customers.

Adjusted EBITDA for Q3 was $242 million, compared with $192 million Y/Y. 

The 150 basis points of margin improvement in Q3 was primarily driven by higher sales volume and beneficial mix, net customer pricing and recovery actions, improved customer order patterns driving higher manufacturing efficiency, and lower net commodity costs. 

The company exited Q3 with cash and equivalents worth $440 million. Cash flow from operations in the quarter was $112 million, compared with $171 million in the same period of 2022.

Also Read: 10 Big 3 Auto Suppliers To Watch With UAW On Strike

Outlook: Dana expects FY23 sales Of $10.7 billion if the UAW strike lasts till Oct. 31 versus an estimate of $10.68 billion (Prior View: $10.45 billion-$10.95 billion).

However, Dana sees FY23 sales of $10.2 billion if the strike lasts till Dec. 31. 

Dana expects FY23 adjusted EPS of $0.80 if the strike lasts through Oct. 31 versus the $0.81 estimate (Prior View: $0.65-$1.05).

Nevertheless, if the strike extends through Dec. 31, the company expects FY23 adjusted EPS Of $0.30.

"The UAW strike is significantly impacting a number of our operations in North America while our heavy-vehicle business and operations in the rest of the world are largely unaffected," said Timothy Kraus, Dana's senior vice president and chief financial officer. 

"If no resolution is reached by year's end at all our Detroit 3 customers, including Ford Motor Company F, we anticipate our sales to be approximately $500 million lower," Kraus added.

Price Action: DAN shares are trading higher by 3.27% at $13.12 on the last check Friday.