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Why Dana Incorporated Popped 11% Higher Thursday

By Daniel Miller – Apr 30, 2020 at 4:54PM

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Dana Incorporated felt the negative impact from COVID-19, but still beat estimates.

What happened

Shares of Dana Incorporated (DAN 7.45%), a global leader in providing power and energy management solutions for vehicles and machinery, are up 11% Thursday afternoon after the company released better-than-expected first-quarter results.

So what

Starting from the top, first-quarter revenue declined 10.6% compared to the prior year, to $1.93 billion, which was enough to top analyst estimates of $1.83 billion. Adjusted earnings per share checked in at $0.47, which was well below the prior year's $0.78 per share but still above analyst estimates of $0.30 per share.

Not only was Dana's business negatively impacted by the COVID-19 pandemic, its first quarter also recorded weaker demand in the heavy-vehicle markets during January and February. However, those adverse impacts were partially offset by conversion of its sales backlog.

Vehicle gear set

Image source: Getty Images.

Now what

The million-dollar question facing most investors is: Does the company have ample liquidity?

Jonathan Collins, executive vice president and chief financial officer at Dana Incorporated, made it a point to address that question: "The strength of our balance sheet and capital structure has given us the flexibility to manage through this period of significantly lower production volumes." More specifically, Dana has more than $1.8 billion liquidity, which doesn't include another $679 million available from its revolving credit facility and another $500 million available under its bridge facility.

While the company does have strong liquidity, investors would be wise to expect a slower recovery within the hard-hit automotive industry and take market volatility in the near term with a grain of salt.

Daniel Miller has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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