Company Announcement - Dorman Products, Inc. announced the retirement plans of David M. Hession, Senior Vice President and Chief Financial Officer, later this year [1] - The company has initiated a search process for Mr. Hession's successor with the help of an executive search firm [1] Leadership Insights - Kevin Olsen, President and CEO of Dorman, acknowledged Mr. Hession's integral role in driving the company's strong financial performance over the past six years [2] - Mr. Hession joined Dorman as CFO in February 2019 and contributed to business expansion through strategic acquisitions and strengthening the company's balance sheet and liquidity [2] Transition Plans - Mr. Hession will remain in his position until a successor is appointed and will serve in an advisory role to ensure a smooth transition [1][3] - He expressed pride in the accomplishments during his tenure and confidence in Dorman's future success [3] Company Background - Dorman has been providing aftermarket replacement products for over 100 years, focusing on solutions that save time and money for vehicle repair [4] - The company offers a diverse catalog of products for various vehicles, including cars, trucks, and specialty vehicles [5]

Industry Outlook - The Zacks Automotive - Replacement Parts industry has a strong outlook due to the aging vehicle fleet in the U.S., which averages 12.6 years, leading to high repair volumes [1][3] - Tariff-driven volatility may reduce new vehicle sales, encouraging vehicle owners to repair rather than replace, thus increasing demand for parts and services [1][4] - The shift towards smart vehicles presents new growth opportunities, requiring adaptation to technology-heavy systems [1][5] Industry Overview - The industry includes companies that produce, market, and distribute replacement components for the automotive aftermarket, focusing on essential parts like engines, brakes, and gearboxes [2] - The auto replacement market is less sensitive to economic downturns as consumers prefer maintaining their vehicles over purchasing new ones [2] Key Themes - The trend of older cars requiring more repairs boosts demand for replacement parts, benefiting the industry as vehicles remain operational longer [3] - Economic uncertainty and higher vehicle prices are leading consumers to hold onto their cars, increasing the demand for repairs [4] - The advancement of vehicle technology necessitates specialized components and skilled technicians, creating new opportunities for growth [5] Cost Management and Innovation - While innovation drives growth, it also increases costs due to the need for R&D and skilled labor, making cost management essential for companies [6] Industry Ranking and Performance - The Zacks Automotive - Replacement Parts industry ranks 23, placing it in the top 9% of approximately 250 Zacks industries, indicating solid near-term prospects [7][8] - The industry's earnings estimates for 2025 have increased by 2% since the beginning of the year, reflecting growing analyst confidence [9] Market Performance - The industry has underperformed compared to the Auto, Tires, and Truck sector and the S&P 500 over the past year, declining by 5.4% [11] Valuation - The industry is currently trading at an EV/EBITDA ratio of 8.61X, significantly lower than the S&P 500's 16.71X and the sector's 21.62X [14] Investment Opportunities - **Dorman Products (DORM)**: A leading player in the automotive aftermarket, known for expanding its product lineup and maintaining a low debt-to-capitalization ratio of 25% [18] - DORM has consistently surpassed earnings estimates, with a consensus estimate for 2025 indicating year-over-year growth of 5% in sales and 10% in earnings [19] - **Standard Motor Products (SMP)**: A major manufacturer of automotive replacement parts, benefiting from strategic acquisitions and low exposure to tariffs [22] - SMP has also exceeded earnings estimates, with a consensus estimate for 2025 showing year-over-year growth of 17% in sales and 13% in earnings [23]

Market Overview - The U.S. stock market displayed mixed signals on May 29, with the Nasdaq and S&P 500 gaining due to NVIDIA's strong quarterly results and a favorable ruling against Trump-imposed tariffs, while the Dow Jones declined amid economic outlook concerns and geopolitical uncertainties [1] Investment Strategy - In a volatile market, investors are advised to consider low-leverage stocks such as Novartis, ENGIE SA, MasTec, Dorman Products, and Sterling Infrastructure to mitigate potential losses [2] - Low-leverage stocks are preferred as they typically bear less financial risk, making them safer options during market turmoil [6][5] Understanding Leverage - Leverage refers to the practice of companies borrowing capital to operate and expand, primarily through debt financing, which can be risky if it does not yield returns exceeding the interest rate [4][5] - A lower debt-to-equity ratio indicates improved solvency and reduced financial risk for a company [7] Stock Selection Criteria - Stocks should have a debt-to-equity ratio lower than the industry median, a current price of at least $10, an average 20-day trading volume of 50,000 or more, and a percentage change in EPS greater than the industry median [11][12] - Additional criteria include a VGM Score of A or B, estimated one-year EPS growth greater than 5%, and a Zacks Rank of 1 or 2 [12] Company Highlights - **Novartis**: Launched a tender offer to acquire Regulus Therapeutics for $7.00 per share, potentially enhancing its RNA-targeted therapies pipeline. The Zacks Consensus Estimate for 2025 sales suggests a 7.1% improvement from 2024, with a long-term earnings growth rate of 7.9% [14][15] - **ENGIE SA**: Reported a 5.6% year-over-year revenue growth in Q1 2025 and has 8.5 GW of renewable and battery capacity under construction. The Zacks Consensus Estimate for 2025 earnings indicates a 22.9% year-over-year improvement [16][17] - **MasTec**: Announced a 6% year-over-year revenue increase in Q1 2025, with a Zacks Consensus Estimate for 2025 sales showing an 11% improvement and earnings expected to rise by 54.9% [17][18] - **Dorman Products**: Released hundreds of new automotive repair solutions, expanding its catalog and creating over 12 million new sales opportunities. The Zacks Consensus Estimate for 2025 sales indicates a 4.9% improvement [19][20] - **Sterling Infrastructure**: Reported a 7% year-over-year revenue increase in Q1 2025, with adjusted earnings per share surging by 29%. The company has a long-term earnings growth rate of 15% [21]

Core Insights - Dorman Products, Inc. is launching hundreds of new automotive repair solutions, many of which are first-to-the-aftermarket products, expanding its catalog to over 138,000 SKUs [1] - The new products create approximately 12+ million new sales opportunities for aftermarket parts distributors, retailers, and repair shops, enhancing accessibility for vehicle owners [1] Company Overview - Dorman has been providing innovative aftermarket replacement products for over 100 years, aimed at saving time and money while increasing convenience and reliability for professionals and vehicle owners [4] - The company is a pioneering global organization with a diverse product catalog covering various vehicle types, including cars, trucks, and specialty vehicles [5] Product Highlights - New product offerings include a smart junction box for Dodge Dakota trucks, an automatic transmission oil cooler for Ford Super Duty trucks, a rugged third brake light for Jeep Gladiator trucks, and integrated door lock/tailgate lock actuators for select Ford, Chrysler, Jeep, and GM vehicles [7]

Core Viewpoint - Dorman Products (DORM) has experienced a bearish trend recently, losing 5.3% over the past week, but the formation of a hammer chart pattern suggests a potential trend reversal as buying interest may be increasing [1][2]. Technical Analysis - The hammer chart pattern indicates a potential bottom in a downtrend, where the stock opens lower, makes a new low, but then finds support and closes near its opening price, suggesting that bears may be losing control [4][5]. - Hammer candles can appear on various timeframes and are utilized by both short-term and long-term investors, indicating their versatility as a technical indicator [5]. Fundamental Analysis - There is rising optimism among Wall Street analysts regarding DORM's future earnings, with a 1.6% increase in the consensus EPS estimate over the last 30 days, indicating a consensus on improved earnings potential [2][8]. - DORM currently holds a Zacks Rank 2 (Buy), placing it in the top 20% of over 4,000 ranked stocks, which historically outperform the market, suggesting strong fundamental prospects for a turnaround [9]. Earnings Estimate Revisions - An upward trend in earnings estimate revisions is a bullish indicator for DORM, as empirical research shows a strong correlation between these revisions and near-term stock price movements [7].

Core Viewpoint - Dorman Products, Inc. has appointed Kathleen Pacheco as President of the Specialty Vehicle business segment, succeeding Lindsay Hunt, who will remain in an advisory role to support the transition and growth of the business [1][2]. Group 1: Leadership Transition - Kathleen Pacheco has been appointed as President of the Specialty Vehicle business segment, replacing Lindsay Hunt [1]. - Lindsay Hunt previously served as the Chief Executive Officer of SuperATV and played a crucial role in the integration of the business following its acquisition by Dorman in 2022 [1][2]. - Kevin Olsen, Dorman's President and CEO, expressed confidence in Pacheco's ability to drive growth and financial performance in her new role [2]. Group 2: Background of New President - Prior to her new role, Kathleen Pacheco served as Chief Operating Officer of the Specialty Vehicle segment and has held senior leadership positions at Tenneco and Johnson Controls [2]. - Pacheco holds a Master of Science in Engineering Management from Marquette University and a bachelor's degree in mechanical engineering from Kettering University [2]. Group 3: Statements from Leadership - Lindsay Hunt praised Pacheco as an exceptional leader with a deep understanding of the business and its strategic objectives, highlighting her contributions to innovation and supply chain transformation [3]. - Kathleen Pacheco expressed her commitment to building on the SuperATV legacy and looks forward to leveraging Hunt's experience in her new role [3].

Market Overview - Major U.S. stock indices ended May 13 on a higher note due to easing trade tensions between the U.S. and China, along with softer-than-expected inflation data [1] - The two nations agreed to a 90-day tariff pause, which has contributed to increased investor optimism [1] Investment Strategy - Positive market sentiment may encourage investors to trade on Wall Street, but the sustainability of this rebound is uncertain due to the temporary nature of the tariff pause and changing global market dynamics [2] - To mitigate potential losses during market turmoil, it is advisable to select low-leverage stocks such as 1st Source (SRCE), Kingstone Companies (KINS), MasTec (MTZ), Dorman Products (DORM), and Sterling Infrastructure, Inc. (STRL) [2] Understanding Leverage - Leverage refers to the practice of borrowing capital for operations and expansion, typically through debt financing [4] - Excessive debt financing can lead to significant losses, making it crucial for investors to avoid companies with high debt levels [5] Debt-to-Equity Ratio - The debt-to-equity ratio is a key metric for assessing a company's financial risk, with a lower ratio indicating better solvency [7] - Companies with high debt-to-equity ratios may face challenges during economic downturns, despite strong earnings growth [8] Stock Selection Criteria - Stocks should have a debt-to-equity ratio lower than the industry median, a current price of at least $10, and an average 20-day trading volume of 50,000 or more [11] - Additional criteria include a percentage change in EPS greater than the industry median, a VGM Score of A or B, estimated one-year EPS growth greater than 5%, and a Zacks Rank of 1 or 2 [12] Company Highlights - **1st Source (SRCE)**: A bank holding company with a net income of $37.52 million for Q1 2025, up 27.38% year-over-year, and a return on average assets of 1.72% [14][15] - **Kingstone Companies (KINS)**: A property and casualty insurance holding company with a 51% year-over-year increase in net premium earned and a 125% surge in EPS for Q1 2025 [16][17] - **MasTec (MTZ)**: An infrastructure construction company with a 6% year-over-year revenue increase and a projected 54.9% improvement in earnings for 2025 [18] - **Dorman Products (DORM)**: A supplier of automotive replacement parts with an 8.3% increase in net sales and a 54% rise in adjusted EPS for Q1 2025 [19][20] - **Sterling Infrastructure (STRL)**: A company specializing in E-Infrastructure and building solutions, reporting a 7% revenue increase and a 29% surge in adjusted EPS for Q1 2025 [21]

Financial Data and Key Metrics Changes - Consolidated net sales for Q1 2025 grew 8% year over year to $508 million, driven by strong customer demand and new product development [7][19] - Adjusted operating margin for Q1 2025 was 17%, expanding 310 basis points compared to the same period last year [8][20] - Adjusted diluted EPS increased by 54% year over year to $2.20, supported by increased operating income and lower interest expenses [8][21] - Free cash flow for the quarter was $40 million, allowing the company to repay $20 million of debt and repurchase $12 million of common stock [8][27] Business Line Data and Key Metrics Changes - Light Duty segment saw net sales increase by 14% year over year, with operating margin rising to 19.9%, a 380 basis point increase [21][22] - Heavy Duty segment experienced a decline in net sales by 11% year over year, with operating margin turning slightly negative due to market pressures [23] - Specialty Vehicles segment's net sales declined by 9% year over year, with operating margin decreasing to 10.2% due to fixed cost deleverage [24][25] Market Data and Key Metrics Changes - Vehicle miles traveled increased year over year, contributing positively to the aftermarket [15] - Consumer spending softened during the quarter, which may pose a headwind moving forward [18] Company Strategy and Development Direction - The company has diversified its supply chain significantly since the tariffs on Chinese imports were enacted, with an estimated 30% to 40% of products sourced from China in 2025 [9][42] - The focus remains on optimizing supply chain strategy and maintaining strong relationships with suppliers to drive redundancy and flexibility [10][11] - The company aims to continue investing in new product development and expanding its dealer network to capture market share [25] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating the current economic uncertainty and highlighted the strength of the company's financial profile as a competitive advantage [14][32] - The company reaffirmed its 2025 net sales growth guidance of 3% to 5% and adjusted diluted EPS guidance of $7.55 to $7.85, excluding potential tariff impacts [29][30] Other Important Information - The company has a strong balance sheet with net debt reduced to $42 million and total liquidity increased to $660 million [28][29] - The management emphasized the importance of nondiscretionary parts in their portfolio, which historically perform well in uncertain economic times [12][13] Q&A Session Summary Question: Have you seen any of your bigger customers buying ahead to get ahead of tariffs? - Management indicated that there have been no significant indications of customers ordering ahead of tariffs at this point [38][39] Question: Can you remind us of some of the mitigation efforts in place regarding tariffs? - Management highlighted a diverse supply chain and a proven playbook for dealing with tariffs, including negotiating cost concessions and driving productivity initiatives [44][45] Question: What was the contribution of new products to growth in the quarter? - Management noted that new products significantly contributed to growth, allowing the company to outperform market growth [64] Question: How much of your product was sourced from China during the previous tariff situation? - Management disclosed that over 70% of products were sourced from China during the previous tariff situation, indicating a much more diversified supply chain now [60][61] Question: How does the tariff situation impact different segments? - Management refrained from disclosing specific impacts by segment but indicated a competitive advantage in light duty and modest impact in heavy duty [72][73]

Dorman Products (DORM) Q1 2025 Earnings Call May 06, 2025 08:00 AM ET Company Participants Alexander Whitelam - Vice President - IRKevin Olsen - President, CEO & DirectorDavid Hession - Senior VP, CFO & TreasurerBret Jordan - Managing DirectorGary Prestopino - Managing DirectorJustin Ages - Director - Equity Research Conference Call Participants Scott Stember - Executive Director & Senior Research Analyst Operator Good morning, and thank you for standing by. Welcome to the Doorman Products First Quarter twe ...

Dorman Products (DORM) Q1 2025 Earnings Call May 06, 2025 08:00 AM ET Speaker0 Good morning, and thank you for standing by. Welcome to the Doorman Products First Quarter twenty twenty five Earnings Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. Please note that this conference is being recorded. I'd now like to turn the conference over to Alex Whitelam, Vice President of Investor Relations. Thank you, sir. Please ...