Dana Holding Corp.: Back From The Red
- Forward P/E:6.3
- Earnings Growth:203%
- Projected Sales Growth:24.5%
- Market Cap:$1.76 billion
Why It's Featured: Great earnings turnaround; expanding internationally. Danger Zones: Extreme volatility in stock price; highly dependent on economic recovery.
Dana Holding Corporation (NYSE: DAN ) engages in the design, manufacture, and supply of products for vehicle manufacturers worldwide. It provides light axles, driveshafts, structural products, sealing products, thermal products, and related service parts for light trucks, sport utility vehicles, crossover utility vehicles, vans, and passenger cars.
The company also offers chassis and side rails, ride controls and related modules and systems, engine sealing products, thermal products, and related service parts for medium- and heavy-duty trucks, buses, and other commercial vehicles.
In addition, it makes transaxles, driveshafts, suspension components, transmissions, electronic controls, related modules and systems, sealing products, thermal products, and related service parts for construction machinery and leisure/utility vehicles, as well as for outdoor power, agricultural, mining, forestry and material handling equipment, and a range of non-vehicular and industrial applications. The company sells under Spicer, Victor Reinz, Parish, and Long trade names. Dana Holding Corporation was founded in 1904 and is headquartered in Maumee, Ohio.
Dana had a tough time during the worst of the recession. Earnings were in the red to the tune of $7.20 in 2008. In '09, the loss was $4.19. Last year things turned positive to 61 cents a share. But this year? What a difference a year makes.
For 2011, 13 analysts have a consensus opinion that EPS (earnings per share) will be $1.65 (with a range of $1.53 to $1.75). For 2012, they see $1.91 (with a range of $1.57 to $2.07). In the fourth quarter, expect 39 cents a share, fully 200% better than the 13 cents recorded last year in the final period. Revenues should be $7.61 billion this year, up 24.5% from 2010. For 2012, analysts forecast $8.2 billion, another 7.9% gain.
Third quarter results tell some of the story. Sales rose by 30% to $1.952 billion. EPS was 36 cents vs 22 cents last year in the third. The revenue increase came from higher demand in the commercial vehicle market. In that group, sales were up 55% while margins widened by 60 basis points over the previous quarter. To help further growth, the company has completed 50% of its contract vehicle repricings, all above current levels. Expect better margin spreads from the higher prices.
Dana has a presence in Thailand, most recently in the news for the terrible flood. It operates 2 plants there, but neither was damaged. But they did need to shut down because of lack of parts produced by other Thai firms. Some of its largest customers in the region, ones like Ford and Nissan, had to stop production because of the floods. Management decreased its full year guidance to reflect the impact of the Thai disaster estimating that full year sales will be up 24% rather than 25% as previously stated.
Management is looking overseas for growth. It recently made deals in China and India which raised the Asia-Pacific revenue contribution to 20%. South America is also adding new sales and now represents 16% of total revenues. The company has only begun its penetration of these and other international markets.
One big red flag needs to be waved. In 2009, at the beginning of the year, the stock traded at 20 cents a share. Of course, earnings were negative, and the whole world felt like it was ending. Since then, the stock has gone almost straight up, peaking at $19.30 earlier this year. Then it dropped to $9.50. Recently it's traded higher. So be prepared for volatility if you add DAN to your portfolio. (For more stock ideas, see www.theonlineinvestor.com)
- Price to sales ratio: .24
- Price to book: 1.74
- Operating margin: 4.87%
- Profit margin: 1.85%
- Return on equity: 7.88%
- Return on assets: 4.2%
- Total cash: $901 million
- Cash per share: $6.12
- Total debt: $904 million
- Total debt to equity: 48.71%
- Current ratio: 1.97
- Book value per share: $6.80
- Beta: 4.46
- 52 week change: - 29.37%
- Shares Outstanding: 147.15 million
- Float: 138.46 million
- Held by insiders: .63%
- Held by insitutions: 96.1%
- There is no dividend.
Valuations are rather compelling at these levels, especially if the company delivers the expected $1.65 a share. That puts the current P/E at less than 8. Of course, if it misses that number by too much, look out. It's history suggests that the bottom can come quickly and it's far below.
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