Dorman (DORM) Q2 EPS Jumps 23%

Dorman Products (DORM 4.64%), a leading supplier of automotive replacement parts and fasteners for the motor vehicle aftermarket, released its second quarter results on August 4, 2025. The headline news is clear: it beat consensus expectations by a wide margin on both GAAP revenue and non-GAAP adjusted earnings per share, fueled by gains in its core Light Duty segment and successful supply chain initiatives. GAAP revenue reached $541.0 million, topping the analyst estimate of $517.0 million (GAAP), while adjusted diluted EPS came in at $2.06, well above the $1.80 non-GAAP estimate. The company also raised its full-year 2025 guidance, building on this momentum for the rest of the year. The quarter demonstrated expanding margins and operational improvements.

Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.

Business Overview and Critical Success Factors

Dorman Products supplies automotive parts, fasteners, and solutions for the aftermarket. Its product catalog included approximately 138,000 unique parts as of December 31, 2024, serving a variety of passenger cars, trucks, and specialty vehicles. It focuses on making replacement parts and upgrade items available for professional technicians and do-it-yourselfers, many of which are otherwise only available through original equipment manufacturers.

The company’s recent business focus has been on expanding its product line, growing its distribution reach, and introducing new products that address complex needs in today’s aftermarket. Its core strengths are a broad product portfolio, ongoing investments in innovation, reliable distribution partnerships, and supply chain management. Key success factors include its ability to create first-to-market automotive solutions, maintain relationships with major retailers, and manage global supply chain risks effectively.

Q2 2025 Results: Financials, Segment Performance, and Operations

Dorman Products’ GAAP revenue rose 7.6% year-over-year. This was supported largely by double-digit sales growth in the Light Duty segment, which saw a 10% year-over-year gain with segment profit margins widening to 18.5% for Light Duty. Demand for repair and replacement parts for passenger vehicles remained robust, helped by ongoing vehicle aging trends and the company’s frequent introduction of new automotive solutions. The Heavy Duty segment showed modest revenue growth of 1%, but profitability declined, with GAAP segment profit margin for Heavy Duty dropping by 360 basis points, reflecting ongoing softness in trucking and freight end markets. The Specialty Vehicle segment, which provides parts for powersports vehicles like utility terrain vehicles (UTVs) and all-terrain vehicles (ATVs), saw sales contract by 3%, though margins remained relatively strong at 17.3% for the Specialty Vehicle segment, with only a modest drop from last year.

The company’s GAAP gross profit margin reached 40.6%, up one percentage point from Q2 2024. Adjusted selling, general, and administrative expenses as a share of revenue increased slightly to 24.3% from 24.0% a year earlier (non-GAAP), with a net margin improvement year-over-year, and adjusted diluted earnings per share (non-GAAP) climbed 23%. These gains reflect both top-line improvement and the effect of margin expansion.

The company continued to expand its product offerings, launching 5,335 new stock-keeping units (SKUs) in 2024, including many first-to-aftermarket solutions. As of December 31, 2024, its portfolio included approximately 138,000 parts. Product launches focus on both traditional hard parts and newer electronic vehicle components, aiming to strengthen its advantage in the auto aftermarket. New products contributed notably to sales growth in the Light Duty segment, as referenced by leadership, and the company credits its success in margin expansion partly to the higher-value mix from recent product introductions and automation initiatives.

Operationally, Dorman further diversified its global supply chain, reducing dependence on China to 30–40% of sourcing in 2025, down from approximately 70% six years ago. This strategy aims to offset risks linked to tariffs and geopolitical uncertainties, and it expects to further adjust pricing and supplier relationships as needed. Management confirmed that the company has a track record of passing on or offsetting costs generated by trade policy changes, especially since most of its products are non-discretionary repair parts.

Cash provided by operating activities (GAAP) dropped sharply to $8.5 million, compared to $63.3 million in the prior year period. Inventory on hand (GAAP) increased to $798.2 million. Long-term debt declined modestly. Two customers remained highly significant, accounting for approximately 39% of total net sales in 2024, representing a continued concentration risk.

Management Outlook and What to Watch

Following the strong quarter, management raised its full-year FY2025 financial guidance. The company now expects net sales growth of 7–9% for FY2025, up from its previous range of 3–5%. Diluted EPS (GAAP) guidance for FY2025 shifted to $8.05–$8.35, versus its previous $7.00–$7.30 range, and adjusted diluted EPS (non-GAAP) moved to $8.60–$8.90 for FY2025, up from $7.55–$7.85. The updated guidance incorporates the impact of existing tariffs as of August 4, 2025 for FY2025, but does not account for any additional trade actions enacted later. The company expects to maintain an effective tax rate of 24% for FY2025.

Looking ahead, investors should monitor Dorman’s ability to manage its large and growing inventory levels, continue its pace of product innovation, and respond to evolving supply chain and tariff risks. Given two major customers make up a large share of sales, relationships with these accounts are also critical. No dividend is currently paid by Dorman Products (DORM 4.64%).

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.