Will Cost Cuts and Backlog Fuel Earnings Growth for Dana?

Dana Incorporated DAN is leaning on two key levers in an uneven auto market— a growing backlog that supports revenue visibility and a cost transformation that is steadily improving margins. Together, these drivers position the company for profit expansion even if industry volumes remain subdued.

Dana’s Backlog Supports Revenue Visibility

Dana has built a $750 million new-business backlog, providing a clearer line of sight into near-term revenue despite muted industry demand and ongoing volatility in electric-vehicle adoption. The backlog reflects continued program wins across platforms, signaling that the company remains competitive even in a cautious environment.

Roughly $200 million of this backlog is expected to convert into revenue in 2026, offering a meaningful buffer against softer volumes. This becomes particularly important as Dana adopts a more selective approach to electric-vehicle bidding, while prioritizing higher-return internal combustion and hybrid programs.

This dynamic extends across the supplier space. BorgWarner Inc. BWA and Aptiv plc APTV are also navigating a market where electrification growth remains uneven, even as legacy demand holds up.

Cost Transformation Drives Margin Expansion

Alongside backlog strength, Dana’s cost transformation is emerging as a central earnings driver. The company delivered approximately $248 million in cost savings in 2025 through material, engineering and manufacturing efficiencies. These initiatives are expected to build further as Dana deepens its focus on operational discipline.

Management is targeting a cost-savings run rate of about $325 million entering 2026. This includes roughly $40 million of stranded-cost elimination following the Off-Highway divestiture, representing a structural reset that simplifies the cost base and enhances operating leverage.

2026 Outlook Points to Higher Profitability

Dana’s 2026 guidance highlights the impact of these efforts. The company expects adjusted EBITDA in the range of $750 million to $850 million, with a midpoint of $800 million. This compares with $610 million in 2025, implying a significant step-up in earnings even without strong revenue growth.

At the midpoint, adjusted EBITDA margin is projected at around 10.6%, or roughly 10% to 11% across the guided range. This suggests margin expansion of about 250 basis points year over year, driven primarily by cost actions and improved business mix.

Commercial Vehicle Margins Improving

The Commercial Vehicle segment is another area where margins are expected to improve. Dana expects flat industry volumes in 2026, with potential upside in the second half of the year. Even so, the company sees room for profitability gains through execution.

A key driver is the ramp-up of a low-cost manufacturing facility in Mexico, combined with ongoing operational efficiencies. Improved cost position, along with strong quality and delivery performance, is expected to support share-of-wallet gains with North American OEMs, further supporting margin expansion.

Investor Takeaway

Dana’s 2026 outlook assumes flat sales, as backlog conversion and tariff and currency benefits offset softer volumes and normalized pricing. Electric-vehicle demand also remains uneven, with lower Light Vehicle EV orders and recent program adjustments highlighting near-term volatility. However, these risks appear manageable given strong backlog visibility, a structurally improved cost base, and a growing mix of higher-margin programs, positioning the company for continued earnings expansion.

The Zacks Consensus Estimate for Dana’s 2026 and 2027 EPS implies a year-over-year uptick of 1,358% and 25%, respectively. See how DAN’s EPS estimates have been revised over the past 90 days.

DAN stock currently sports a Zacks Rank #1 (Strong Buy).You can see the complete list of today’s Zacks #1 Rank stocks here.

Image Source: Zacks Investment Research

Research Chief Names "Single Best Pick to Double"

From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.

This company targets millennial and Gen Z audiences, generating nearly $1 billion in revenue last quarter alone. A recent pullback makes now an ideal time to jump aboard. Of course, all our elite picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Nano-X Imaging which shot up +129.6% in little more than 9 months.

Free: See Our Top Stock And 4 Runners Up

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

BorgWarner Inc. (BWA): Free Stock Analysis Report

Dana Incorporated (DAN): Free Stock Analysis Report

Aptiv PLC (APTV): Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research