Auto parts manufacturer Dana Incorporated DAN is riding on efforts to streamline operations by focusing on its core on-highway end markets. The company's efficiency gains aren’t just improving its bottom line, they're also fueling investor confidence.

So far this year, shares of Dana have surged roughly 23%, outperforming the industry, the sector and its close competitors American Axle AXL, BorgWarner BWA and Allison Transmission ALSN.

YTD Price Performance Comparison

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At this point, investors might be wondering—does this rally have more legs, or is it time to lock in gains? Let’s break down Dana’s 2024 results, 2025 outlook, and key fundamentals to see whether the stock is still a buy.

Dana’s 2024 Results Highlights

The company recorded sales of $10.3 billion in 2024, down 2.8% year over year due to lower demand for both electric vehicle (EV) and internal combustion engine (ICE) programs. Further, the off-highway equipment demand weakened in the second half of last year, limiting revenues.

Despite the revenue drop, EBITDA for the full year rose 4.7% to $885 million thanks to cost-containment initiatives. The company began seeing early gains from plant consolidation and footprint optimization. EBITDA margins improved 60 basis points from 2023 to 8.6%. Dana registered a free cash flow (FCF) of $70 million against the outflow of $25 million in 2023, buoyed by improved profitability and lower capital expenditure.

Dana's three-year net new sales backlog is $650 million, with $150 million expected in 2025, $300 million in 2026 and $200 million in 2027.

In the trailing four quarters, DAN surpassed earnings estimates twice for as many misses.

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Streamlined Portfolio & Cost Structure to Aid DAN

Dana is making bold moves to strengthen its business and improve profitability. The company has two key strategies in play— a major cost-reduction plan and a portfolio reshuffle.

First, Dana is targeting $300 million in cost savings by 2026, aiming to boost EBITDA margins even as revenue declines. The plan includes reducing complexity, cutting overhead costs and streamlining operations. Management is making deep cuts to selling, general and administrative expenses across all business units. Additionally, engineering spending will be reduced to align with slower EV adoption. As a result, Dana expects adjusted EBITDA margins to rise to 8.1-8.6% in 2025 and 9.5-10.5% in 2026.

Second, Dana is optimizing its portfolio by selling its Off-Highway business, with the deal expected to be signed in the early second quarter of this year and closed by year-end. In 2024, this division generated $2.76 billion in sales, down from $3.18 billion in 2023. The sale will transform Dana into a leaner company focused on light and commercial vehicles with a more efficient go-to-market strategy. The proceeds will help reduce leverage, strengthen the balance sheet and return capital to shareholders, unlocking significant value.

Dana will be restructuring into two core segments— Light Vehicle Systems and Commercial Vehicle Systems. The Power Technologies business will be integrated into these divisions, improving efficiency and customer service.

Dana’s 2025 Outlook

Dana envisions $9.77 billion in revenues this year at the midpoint of its guidance, implying a 5% decline from 2024. Organic sales are expected to reduce by $285 million. This will be a result of lower demand across end markets, EV program delays and unfavorable currency exchange rates. In 2024, forex fluctuations lowered sales by $49 million, and this year, they are projected to take an even bigger toll—around $195 million.

This year, Dana is experiencing slower production due to high vehicle inventories across several of its programs. However, conditions are expected to improve in the second half of the year as inventories normalize. First-quarter 2025 is going to be particularly challenging, with sales expected to be $500 million lower than the year-ago period.

While the commercial vehicle market is a bit weak right now, Dana expects it to stabilize by year-end. The company also anticipates a boost from pre-buying ahead of the 2026 emissions rule changes.

Dana expects adjusted EBITDA of $975 million at the midpoint of its guided range, up $90 million from 2024. Cost-saving efforts, totaling $175 million, will contribute 180 basis points to margin expansion. FCF for 2025 is projected at $225 million, $155 million higher than last year. This includes $90 million from stronger EBITDA, offset by $20 million in one-time costs for cost-saving initiatives and the off-highway divestiture. Working capital needs will fall by $40 million, while capital spending is set at $325 million, $55 million lower than in 2024.

What Do Zacks Estimates for DAN Say?

The Zacks Consensus Estimate for DAN’s 2025 and 2026 EPS implies year-over-year growth of 70% and 31%, respectively. The estimates are also witnessing upward revisions.

Consensus Estimate Trend

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Dana Isn’t Overvalued

At its current levels, Dana trades at 0.21X forward sales, which is lower than BWA and ALSN but slightly higher than AXL. DAN has a Value Score of A.

DAN's F12M P/S Vs. Peers

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How to Play DAN Stock Now?

Dana faces challenges like inflation, tariffs, currency fluctuations and high vehicle inventories and global uncertainty. Financially, Dana’s long-term debt-to-capital ratio sits at 65%, higher than the industry average of 21%. Sales may remain under pressure this year, but cost-cutting efforts and portfolio optimization are key catalysts.

With these strategic shifts, Dana is positioning itself for stronger margins, better financial health and a more focused business model—key factors that could drive long-term shareholder value. Upward estimate revisions and a relatively better valuation than most peers are other positives. Dana's strong fundamentals make it worth buying, with pullbacks offering even better entry points.

DAN currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks Rank #1 stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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