What happened
Autoparts manufacturer Dana (DAN 1.40%) fell well-short of expectations in the fourth quarter and warned that 2023 will be a lot worse than analysts had expected. Investors veered for the exit ramp, sending Dana shares down as much as 17% on Tuesday.
So what
Dana lost $0.10 per share in Q4, significantly underperforming Wall Street's $0.26 per-share profit expectation, though revenue at $2.56 billion was slightly ahead of consensus. The company, a maker of transmissions, axles, and energy-management systems for vehicles, attributed the loss primarily to a recording of a $155 million non-cash valuation allowance on U.S. federal tax credits.
Absent the one-time shift, Dana said it would have earned adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $176 million, an increase over the $118 million for the same period in 2021.
For the full year, Dana reported revenue of $10.2 billion, an increase of 14% year over year. Operating cash flow came in at $649 million, up from $491 million in 2021. The company also said it made progress working with customers toward being the vendor of choice as automakers move toward electric vehicles.
CEO James Kamsickas said the following in a statement:
Dana continues to successfully execute as front runners in the transformation to a zero-emission world, while taking extraordinary operational actions to serve our customers, including scaling operations to support near-term market share gains. CEO James Kamsickas said in a statement.
Now what
The real issue for Dana was the guidance. The company said it expects to post adjusted earnings of between $0.25 and $0.75 per share in 2023, significantly below the $1.73 per share analysts had expected. Revenue is expected to come in at between $10.35 billion and $10.85 billion, within the $10.49 billion estimate.
The automotive industry is in the middle of a transformation away from internal combustion engines and toward greener options, and Dana has come a long way in its effort to make sure its business doesn't dry up during the shift. But transitions take time and cost money. Investors got a stark reminder of the expense in the latest earnings report.
