Serious Margin Challenges At Dana Prove Too Spicy For The Street

 

I pushed my luck.

Writing about Dana (NYSE:DAN) in March of last year, I was encouraged by the strong performance of this light truck and commercial vehicle supplier during the pandemic, as well as its underrated leverage to electrification. Unfortunately, input costs and issues tied to OEM production schedules hammered the business, especially in the second half of 2021, and sent the shares down about 30%, worse than the 20% to 25% declines for most commercial vehicle suppliers like American Axle (AXL), Cummins (CMI), CVG (CVGI), Meritor (MTOR) (pre-deal), and so on.

The margin weakness is disappointing to be sure, but I don’t believe it necessarily reveals any fundamental weakness in the business or its management, as I believe the circumstances of the last six to 12 months are far from typical. Moreover, I still see a meaningful electrification opportunity here and a pretty compelling valuation that can drive double-digit future annualized returns.

 

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Serious Margin Challenges At Dana Prove Too Spicy For The Street