Dana projects $590M adjusted EBITDA for 2025 with narrowed outlook, driven by accelerated cost savings

Earnings Call Insights: Dana Incorporated (DAN) Q3 2025

MANAGEMENT VIEW

* CEO R. McDonald stated that "improving business performance" is expected to accelerate in the fourth quarter, driven by restructuring initiatives shifting from headwinds to tailwinds. He highlighted "volume comps are getting better," with tariff impacts minimal in Q3 and annual charges lower than previously anticipated. McDonald added, "we are realizing [cost savings] quicker, and that's helping us with some of the uplift to our outlook here."
* McDonald addressed negatives including "some volume softness, particularly in CV North America and to a lesser extent in Brazil," and noted "supplier or some EV program cancellations" with related charges expected to be recovered in Q4. He confirmed the Off-Highway divestiture "remains on track," with most regulatory approvals in place and closing anticipated later in Q4.
* On capital returns, McDonald noted, "we talked about buying between $100 million and $150 million of shares in the third quarter. We actually bought more than that $9.5 million or 7% of our shares outstanding... we've bought nearly 30 million shares or just over 20% of our shares outstanding."
* Cost savings are nearly at "our full year run rate of $73 million" this quarter, with "tariffs... getting a little bit better" and a recovery rate now "up in the upper 80%." The light-truck market remains "relatively stable" while Commercial Vehicle outlook continues to deteriorate in North America and Brazil. He concluded, "we are taking our full year guide up $15 million at the midpoint."
* CFO Timothy Kraus reported, "sales for the quarter were $1.917 billion, up $20 million compared to Q3 of last year." Adjusted EBITDA reached $162 million, improving $51 million year-over-year. He noted, "Our margin expanded by 260 basis points to 8.5%... EBIT improved significantly to $53 million from a loss of $8 million in the prior period."
* Kraus further shared, "Net income attributable to Dana was $13 million compared with a loss of $21 million in Q3 of last year, a positive swing of $34 million."

OUTLOOK

* Kraus stated, "We expect sales from continuing operations to be approximately $7.4 billion at the midpoint of the tightened range. Adjusted EBITDA from continuing operations is now expected to be about $590 million at the midpoint of the narrower range."
* Full year adjusted free cash flow is anticipated at $275 million at the midpoint. Kraus added, "profit improvement in continuing operations is expected to be offset by lower profit from discontinued operations."
* McDonald reiterated, "we were going to have 10% to 10.5%... margins for 2026."

FINANCIAL RESULTS

* Kraus reported, "adjusted free cash flow of $101 million which represents a $109 million improvement compared to the prior year," driven by "higher profitability and lower working capital requirements."
* On cost savings, "Cost savings added $73 million in profit through the actions we have taken across the company. This brings us to $183 million to date, and we are securing our increased target of $235 million in savings for the full year 2025."
* Kraus noted capital spending was $59 million, up $16 million year-over-year, "as we continue to invest in new programs to support our backlog."

Q&A

* Gautam Narayan, RBC Capital Markets: Asked about the impact of tariff policy changes on Dana versus European peers. McDonald responded, "the rebate is based on vehicles assembled in the U.S... the most important thing... is... the risk [of OEMs passing on higher prices] has substantially diminished with the new guidelines."
* Narayan also inquired about Commercial Vehicle softness and recovery prospects. McDonald replied, "We're not seeing any light at the end of the tunnel... it's going to be a fairly soft market here certainly for as long as we can see into mid-2026."
* Emmanuel Rosner, Wolfe Research: Probed the implied Q4 margin improvement. Kraus cited "continued improvement coming through from our cost savings initiative... we are at the tail end of some restructuring actions... which have some headwinds... that we think will also drive additional performance and better profitability into the fourth quarter."
* Yan Dong, Deutsche Bank: Asked about the $110 million performance improvement. Kraus explained, "it's mostly driven by pricing improvement... bringing new platforms and new programs in place that comes with revised pricing." Follow-ups addressed Light Vehicle and Commercial Vehicle outlook into 2026, with McDonald citing tailwinds from "oil prices being quite soft" and upcoming Super Duty production increases.
* James Picariello, BNP Paribas: Sought quantification of cost savings beyond the $310 million program. McDonald indicated "probably have another $50 million, $75 million that we can get over the next few years," and highlighted automation as a future focus. Kraus estimated CapEx at "about the 4% of sales range."
* Joseph Spak, UBS: Questioned timing and impact of investments in plant automation. McDonald confirmed, "we plan to take some of those dollars and re-deploy them... we'll spend that capital to find areas... this will be a bit more deliberate and accelerated."
* Ryan Brinkman, JPMorgan: Asked about confidence in achieving margin targets. Kraus stated, "Bruce and I and the entire team are supremely confident in our ability to deliver what we've said for next year."
* Colin Langan, Wells Fargo: Asked about Q4 margin drivers and backlog changes. Kraus detailed, "we do have those actions. There's also additional performance actions at the plant level... our backlog has been impacted by program delays and cancellations."

SENTIMENT ANALYSIS

* Analysts' tone was neutral to slightly negative, with persistent questions about Commercial Vehicle softness, margin sustainability, cost savings, and backlog integrity. Multiple analysts sought clarification on recurring themes, such as tariff impacts, backlog changes, and cost-saving run rates, indicating a degree of skepticism about durability of improvements.
* Management's sentiment was confident during prepared remarks, emphasizing delivery on commitments and accelerated cost savings. In the Q&A, management remained assertive, often reiterating confidence in targets and referring to current actions as "a great springboard into 2026." Phrases like "supremely confident" and "highly confident in our number" were used, showing continued conviction in their outlook.
* Compared to the prior quarter, the overall tone shifted from constructive optimism to more defensive confidence, as management responded assertively to more pointed analyst questions about risk and execution.

QUARTER-OVER-QUARTER COMPARISON

* Guidance for adjusted EBITDA was raised to $590 million from $575 million, with free cash flow guidance unchanged at $275 million at the midpoint.
* Management emphasized acceleration in cost savings, reporting $73 million in profit from these actions in Q3 versus $59 million in Q2. Q3 margins improved to 8.5% from 7.5% in Q2.
* Off-Highway divestiture remains on track, with more regulatory clarity compared to Q2.
* Analysts' questions in Q3 increasingly focused on sustainability of margin expansion, backlog integrity, and market softness, compared to Q2's focus on cash flow and cost program details.
* Management's tone remained confident, though Q3 saw more detailed explanations about automation investments and cost structure, and a more defensive posture when pressed about Commercial Vehicle headwinds and EV program cancellations.

RISKS AND CONCERNS

* Management highlighted continued volume softness in Commercial Vehicle, especially in North America and Brazil, with no near-term recovery expected.
* EV program cancellations and resulting charges were noted, with McDonald and Kraus expecting recovery in Q4 following active discussions with OEMs.
* Backlog deterioration due to "easy program cancellations, deferrals or lower volumes" was acknowledged, with a more fulsome update promised for January.
* Analysts repeatedly flagged uncertainty about future margin drivers, backlog quality, and the impact of automation investments.

FINAL TAKEAWAY

Dana Incorporated reported an improving business performance in Q3 2025, characterized by accelerated realization of cost savings, a narrowed and slightly raised full-year guidance, and progress on its Off-Highway divestiture. Management remains confident in achieving double-digit margins for 2026, with ongoing capital returns and a clear focus on operational efficiencies and automation. Despite headwinds in Commercial Vehicle markets and backlog reductions from EV program cancellations, the company expects these actions and investments to provide a stronger foundation for next year and beyond, with a comprehensive backlog update planned for January.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/dan/earnings/transcripts]

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