What happened

Shares of auto parts manufacturer Dana (DAN 1.09%) were down 13.7% as of 1:35 p.m. EDT Tuesday after the company beat on sales but missed on earnings in its Q3 report this morning.

Analysts had forecast Dana would earn $0.46 per share (pro forma) on sales of $2.1 billion in the third quarter. Dana edged out that sales forecast with $2.2 billion in revenue, but whiffed on earnings, reporting just $0.41 per share.  

Big red arrow going down over a stock chart.

Image source: Getty Images.

So what

It gets worse. When calculated according to generally accepted accounting principles (GAAP), Dana actually earned only $0.33 per share (albeit that was $0.02 better than a year ago). In any case, the increase in GAAP profits (just 6.5% year over year) was significantly slower than Dana's growth in sales, which were up 10.5% year over year, indicating a deterioration in profit margin.  

Indeed, operating profit margin slipped about 20 basis points to 2.9%, a fact management blamed on "rising commodity costs, supply chain constraints, and labor shortages across the entire global mobility industry."

Now what

The good news is that while management expects these challenges to continue "in the near-term" and says that this will depress 2021 results, Dana remains confident that it can still deliver full-year sales between $8.8 billion and $9 billion, which would represent growth of 27% year over year. The company expects GAAP earnings of $1.65 to $2.05 per share versus a net loss last year (and a pre-pandemic 2019 full-year profit of $1.56 per share).

That's a solid performance -- if Dana can achieve it -- and implies a valuation of no worse than 13.2 times full-year earnings on this stock. Not a bad value, if you ask me, for a company that expects to grow earnings 18.5% over 2019 levels.