COLMAR, PA — Dorman Products Inc. (Nasdaq: DORM) lowered its 2026 sales growth forecast after third-quarter profit fell 23% despite higher revenue, as tariff-related pricing comparisons and shrinking margins weighed on the automotive replacement parts supplier’s earnings.
The company reported net income of $59.2 million, or $1.98 per diluted share, for the quarter ended September 26, compared with $76.4 million, or $2.48 per share, a year earlier. Revenue increased 3.3% to $561.7 million from $543.7 million.
Dorman now expects full-year sales growth of 2% to 3%, down from its previous forecast of 3% to 5%. The company also narrowed its earnings outlook, incorporating additional pricing actions planned for the fourth quarter.
The revised forecast calls for diluted earnings of $7.95 to $8.15 per share, compared with the previous range of $7.93 to $8.23. Adjusted diluted earnings are projected at $8.50 to $8.70 per share, versus the earlier estimate of $8.50 to $8.80.
The updated guidance incorporates tariffs enacted through October 26, 2026, but does not assume subsequent changes in trade policy.
Dorman’s third-quarter gross profit declined 8.2% to $221.6 million from $241.4 million a year earlier, even as sales increased.
Gross margin contracted to 39.4% from 44.4%, a five-percentage-point decline that reflected pressure on profitability across the company’s operations.
Operating income fell 21.6% to $82.9 million from $105.8 million. Operating margin narrowed to 14.8% from 19.4%.
Chairman, President and Chief Executive Officer Kevin Olsen attributed the year-over-year earnings decline partly to the timing of tariff-related pricing that benefited the third quarter of 2025.
“The year-over-year earnings comparison reflects the timing of tariff-related pricing that benefitted the third quarter of 2025,” Olsen stated.
The company plans additional pricing adjustments during the fourth quarter as it manages the effects of tariffs and other operating conditions.
Adjusted diluted earnings, which exclude certain acquisition-related and other items, declined 21% to $2.08 per share from $2.62 a year earlier.
Adjusted net income fell to $62.2 million from $80.8 million.
Sales increased across all three of Dorman’s business segments, supported by new product introductions and additional business.
The Light Duty segment, the company’s largest operation, generated $443.7 million in sales, up 3% from $430.3 million. Its segment profit margin fell to 18.5% from 23.7%, a decline of 5.2 percentage points.
Heavy Duty revenue increased 5% to $66.1 million from $63 million, but its segment profit margin declined to zero from 4.5% a year earlier.
The Specialty Vehicle segment recorded sales of $51.9 million, up 3% from $50.4 million. Its profit margin improved to 13.1% from 12.8%, making it the only segment to report year-over-year margin expansion.
Selling, general and administrative expenses increased to $138.7 million from $135.7 million, although they declined as a percentage of sales to 24.7% from 25%.
The company also recorded approximately $826,000 in pretax facility consolidation costs during the quarter, reflecting planned facility consolidations and relocations.
Despite weaker quarterly profitability, Dorman generated $64.6 million in operating cash flow, compared with $12.2 million in the prior-year period.
The company repurchased $15 million of its common stock during the quarter, bringing total repurchases through the first nine months of 2026 to a company record $112 million.
For the first nine months, Dorman generated $260.9 million in operating cash flow, compared with $72 million during the corresponding period of 2025.
The increase in cash generation coincided with a substantial reduction in inventory. Inventories stood at $787.4 million on September 26, down from $959 million at the end of 2025.
Cash and cash equivalents increased to $167 million from $49.4 million over the same period.
Long-term debt stood at $440.7 million at the end of the third quarter, compared with $402.4 million at year-end 2025. The company’s $37.5 million current portion of long-term debt reported at the end of 2025 was eliminated.
For the first nine months of 2026, revenue increased 2.7% to $1.64 billion from $1.59 billion a year earlier.
Nine-month net income declined slightly to $190.5 million from $192.6 million, while diluted earnings per share increased to $6.33 from $6.26, reflecting a lower average share count.
Adjusted diluted earnings for the nine-month period rose to $6.73 from $6.70.
Dorman’s revised full-year outlook implies reported diluted earnings growth of 20% to 23% compared with 2025, while adjusted diluted earnings are expected to decline 2% to 4%.
The company expects its full-year effective tax rate to range from 23.5% to 24%, compared with its previous estimate of 23.5%.
Dorman supplies aftermarket replacement components for passenger vehicles, commercial trucks and specialty vehicles, with a product portfolio spanning mechanical, electrical and electronic systems.
Its latest results show continued demand for replacement parts and improved cash generation, but also underscore the pressure that tariff-related pricing and weaker segment margins are placing on earnings as the company approaches the final quarter of 2026.
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