Dorman 10-Q: Q3 EPS Falls to $1.98 as Tariffs Cut Gross Margin 500 bps
DORM sits 26% above its 52-week low of $98.445.
Summary
Dorman's Q3 10-Q details the tariff-driven margin squeeze behind its earnings decline: gross margin fell 500 basis points to 39.4% and diluted EPS dropped to $1.98 from $2.48. Strong cash flow and a completed debt refinancing offset some of the damage.
Key Events · Earnings and Guidance · DORM
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Q3 Earnings Decline on Tariff Costs
Net income fell to $59.2 million, or $1.98 per diluted share, from $76.4 million, or $2.48, a year earlier, on net sales of $561.7 million, up 3.3%.
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Gross Margin Down 500 Basis Points
Gross margin fell to 39.4% from 44.4% as higher tariff costs hit cost of goods sold; the prior-year quarter benefited from tariff pricing without the matching costs.
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Cash Flow Boosted by Tariff Refunds
Nine-month operating cash flow was $260.9 million versus $72.0 million a year earlier, including $98.1 million of IEEPA tariff refunds and a $177.6 million inventory reduction.
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Debt Refinanced to 2031 and 2034
June 2026 refinancing issued $450.0 million of 6.25% senior notes due 2034 and replaced the revolver with an $800.0 million facility maturing 2031; $798.9 million was available at quarter end.
Analysis · DORM · Manufacturing
The headline is already out — Dorman beat on adjusted EPS but posted a 21% earnings decline and trimmed its 2026 sales growth outlook — so the 10-Q's value lies in the detail behind that miss. Tariff costs are now flowing through cost of goods sold, cutting gross margin 500 basis points to 39.4%, while last year's quarter enjoyed tariff-driven price increases without the matching costs. That is the core problem: pricing power was already used, and the cost is arriving now. Offsetting it, nine-month operating cash flow jumped to $260.9 million from $72.0 million, helped by $98.1 million of IEEPA tariff refunds and a $177.6 million inventory release, and the June refinancing pushed debt maturities out to 2031 with $798.9 million available on the revolver. The buyback remains large at $348.3 million authorized, and five insiders — including the CEO — set up new 10b5-1 sales plans during the quarter.
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At the time of this filing, DORM was trading at $124.00 on NASDAQ in the Manufacturing sector, with a market capitalization of approximately $3.7B. The 52-week trading range was $98.45 to $164.00. This filing was assessed with negative market sentiment and an importance score of 7 out of 10.