Dana's FY24 Preliminary Results: Increased Margins Amid EV Demand Slowdown; Stock Jumps

Dana Incorporated (NYSE: DAN) shares traded higher on Friday after the company disclosed its FY24 preliminary results, FY25 outlook, and provided a business update. The company's adjusted EBITDA margin in FY24 was 8.6%, a 60-basis-point improvement compared to 2023, driven by efficiency gains and cost-savings actions. Despite a slowdown in electric vehicle (EV) demand, Dana's margins compared favorably to its peers in the automotive industry, such as General Motors (GM) and Ford Motor Company (F), which reported adjusted EBITDA margins of 7.5% and 6.5%, respectively.



Dana's sales in 2024 were approximately $10.3 billion, down from $10.6 billion in 2023, primarily due to weaker demand for electric vehicles, commercial trucks, off-highway equipment, and higher light truck inventory. The company expects sales to be in the range of $9.525 to $10.025 billion in 2025, which is lower than the consensus estimate of $9.83 billion. This decrease is mainly driven by lower demand for off-highway equipment and translation of foreign currency.



Dana's adjusted EBITDA margin in 2024 was 8.6%, up from 8.0% in 2023. The company expects its adjusted EBITDA margin to be around 10.0% in 2025, indicating a potential decrease in profitability. Dana's free cash flow in 2024 was approximately $70 million, compared to a use of $25 million in 2023. However, higher than expected working capital requirements in the fourth quarter lowered free cash flow from the company's prior estimate.

To mitigate the impact of the slowdown in EV demand, Dana plans to increase its total cost reduction target to $300 million through 2026, up from the previous target of $200 million. The company is also simplifying its organizational structure by creating two business segments: Light Vehicle Systems and Commercial Vehicle Systems. Additionally, Dana is pursuing the sale of its Off-Highway business, which is expected to unlock substantial value for shareholders and strengthen the company's balance sheet through reduced leverage.



Analysts have a positive outlook on Dana's stock, with an average rating of "Buy" and a 12-month price forecast of $15.0, which is a decrease of -2.98% from the latest price. The company's strategic decisions to divest its Off-Highway business and simplify its organizational structure align with its long-term growth prospects by allowing it to focus on core businesses, streamline costs, and enhance its go-to-market approach. However, potential challenges such as loss of market share, integration and transition challenges, and uncertainty in the sale process should be carefully managed to ensure a successful outcome.

In conclusion, Dana's FY24 preliminary results highlight increased margins amid a slowdown in EV demand, with the company's adjusted EBITDA margin improving to 8.6% compared to 2023. Despite lower sales and profitability expectations for 2025, Dana's strategic decisions and cost-cutting measures position the company for long-term growth and value creation.