Resilient demand for professional auto repairs and an expanding product range support the outlook for Dorman Products (NASDAQ: DORM), according to Freedom Broker analysts Kanagat Yertay and Dmitry Pozdnyakov. The experts upgraded the stock from “Hold” to “Buy” while simultaneously lowering the target price from $154 to $152.
Dorman Products supplies replacement parts for repairing passenger cars, trucks, and off-road vehicles. The company sells products through distributors and retail partners serving auto repair shops and individual customers. The new target implies upside of about 22.3% relative to the $124.31 price used in Freedom’s report.
Earnings beat analysts’ forecast
In Q3 2026, Dorman’s revenue rose 3.3% year over year to $561.7 million. At the same time, the figure was 2.7% below Freedom’s forecast of $577 million.
Adjusted earnings per share were $2.08—8% above the analysts’ estimate of $1.93. The beat was driven primarily by lower-than-expected selling, general, and administrative expenses.
However, earnings declined versus last year, when adjusted EPS was $2.62. In the quarterly report, the company attributed the difference in part to a tough comparison base: in Q3 2025, price increases to offset import tariffs outpaced the rise in the related costs.
Price reductions are weighing on sales
Freedom estimates that the revenue shortfall versus the forecast is mainly related to pricing dynamics. After last year’s price hikes due to tariffs, Dorman began lowering selling prices in Q2 2026.
Gross margin was 39.4% versus 44.4% a year earlier. The result was essentially in line with Freedom’s forecast, so the gross profit shortfall is attributed by the analysts primarily to lower revenue.
Demand differs by channel. Sales for professional auto repairs are strengthening, while purchases for do-it-yourself repairs remain under pressure from inflation. Additional weakness is observed in the recreational-vehicle segment.
The company cut its revenue growth forecast
Management lowered its expected 2026 revenue growth from 3–5% to 2–3%. The adjusted EPS range was narrowed to $8.50–8.70.
Freedom cut its 2026–2028 revenue forecasts by roughly 2–3%, but slightly raised its adjusted EPS estimates for 2026 and 2027—to $8.63 and $9.29, respectively.
The analysts expect pressure from price reductions to persist at least into early 2027. Further out, higher sales volumes and operating efficiency could support a gradual recovery in profitability.
Cash flow rose, but part of the improvement is one-off
Dorman’s operating cash flow reached $64.6 million versus $12.2 million a year earlier. Free cash flow, by Freedom’s calculations, was about $57 million. This included $18 million in import-tariff refunds—without that amount, the figure would have been roughly $39 million.
In Q3, the company allocated $15 million to share buybacks. Since the start of the year, buybacks have reached a record $112 million for Dorman.
Why Freedom upgraded its recommendation
Despite a more cautious sales outlook, the analysts maintain a positive view of the company’s long-term earnings. It is supported by demand from repair shops, new products, and a strong balance sheet.
Previously, Freedom highlighted Dorman among small-cap companies, citing the aging U.S. vehicle fleet and the high cost of new cars as factors driving demand for parts.
The updated $152 target price reflects revised forecasts. Key to realizing the upside are a recovery in profitability, sustained demand for professional repairs, and working-capital control.
This is not an individual investment recommendation.