On Tuesday, CFRA downgraded shares of Dana Holding (NYSE:DAN) from Buy to Hold, adjusting the price target to $10.00 from the previous $14.00. The firm cited a significant reduction in their 12-month target based on a forward P/E of 7.4x, which is below Dana's 10-year mean forward P/E of 13.9x. The downgrade came after Dana reported a Q4 adjusted EPS of -$0.08, falling short of the -$0.10 consensus by three cents.
The shortfall was attributed to lower-than-expected net sales, with revenue declining 2% to $2.49B, which was $100M below the consensus. Additionally, Dana's adjusted EBITDA margin shrank by 60 basis points to 6.3%, albeit 20 basis points above the consensus. This performance has been identified as particularly disappointing within the auto supplier sector this earnings season.
Dana has also set forth its 2024 guidance for net sales and EPS, projecting ranges of $10.65B to $11.15B and $0.35 to $0.85, respectively. These figures contrast with the current consensus of $10.97 B for net sales and $1.76 for EPS. The analyst from CFRA expressed concerns about Dana's balance sheet, considering it overleveraged, and pointed out that the estimated 2024 free cash flow of only $25M to $75M will likely not allow for significant debt reduction.
The lowered EPS estimates by CFRA reflect a downward adjustment to $0.65 from $1.30 for 2024 and to $1.35 from $1.80 for 2025. The revised outlook and the disappointing Q4 results have led to the downgrade in Dana's stock rating and the reduction in the price target.
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