Dorman Products Inc

Dorman Products, Inc. (DORM) was a top contributor in the Small Cap strategy during the second quarter, reporting net sales of $528.8 million, up 4.2% year-over-year, and revenue modestly ahead of consensus expectations. Despite a 22% year-over-year decline in adjusted diluted EPS due to significant margin compression from tariff-related costs, management reaffirmed full-year guidance for net sales growth of 7%–9% and adjusted diluted EPS of $8.10–$8.50. We believe the share price recovery reflects investor recognition that the Q1 margin trough was largely a timing phenomenon, with tariff costs expected to abate and operational initiatives taking effect. The core Light Duty franchise benefits from a compelling new product pipeline and the long-term tailwind of an aging vehicle fleet.

Dorman Products manufactures and sells aftermarket car parts. The company scores well on our dashboard, having grown historically at a consistent mid-single digit rate, with high returns on capital in a non-cyclical industry. Debt to EBITDA is less than 1x, and DORM uses its cash flow to buy back stock. Dorman is currently trading at a discount to its historical earnings multiple and we believe its shares are attractively priced.

Dorman Products (DORM) was a bottom contributor in the period, even as fundamentals remained constructive in its latest earnings release. Dorman reported net sales of $543.7 million (+7.9% YoY) and meaningful gross profit improvement with gross profit at 44.4% of net sales (up from 40.5% a year ago), reflecting favorable mix and execution—particularly within Light Duty. We believe the share weakness was more about near-term market positioning and expectations than business deterioration, as we see continued strength in the core business and expect solid results to continue.