Motorcar Parts of America (NASDAQ:MPAA) reported financial results for its fiscal third quarter that fell short of analyst expectations, leading to a sharp decline in the company's share price in pre-market trading. The automotive parts remanufacturer cited a significant, though temporary, reduction in orders from a major customer as the primary driver behind the miss.
Earnings and Revenue Versus Estimates
The company's results for the quarter ended December 31, 2025, came in below Wall Street's forecasts on both the top and bottom lines.
- Revenue: Reported net sales were $167.7 million, a decrease from $186.2 million in the prior-year period. This fell short of the analyst consensus estimate of approximately $192.8 million.
- Earnings Per Share: The company reported net income of $1.8 million, or $0.09 per diluted share on a GAAP basis. After adjusting for certain non-cash and one-time items, the results were impacted. This performance was below the estimated Non-GAAP EPS of $0.23.
Management attributed the sales decline to an approximate $17 million reduction from a large customer who was closing stores and consolidating distribution centers. They emphasized that sales to this customer have begun to increase again in the current fourth quarter.
Market Reaction and Revised Outlook
The market's reaction was decisively negative. Following the earnings release, MPAA shares were down approximately 15% in pre-market trading. This sell-off reflects investor disappointment with the earnings miss and the company's decision to revise its full-year guidance downward.
In its release, Motorcar Parts of America provided updated fiscal 2026 guidance, which now sits below current analyst projections:
- Company's Revised Sales Guidance: $750 million to $760 million for the full year.
- Analyst Sales Estimate for FY2026: Approximately $831.3 million.
- Company's Revised Operating Income Guidance: $72 million to $79 million.
The guidance revision directly cites the reduced ordering pattern from the aforementioned large customer. For the upcoming fourth quarter, analysts had been estimating sales of around $225.6 million, a target the company will need a strong rebound to meet.
Key Takeaways from the Quarterly Report
Beyond the headline misses, the earnings release highlighted several strategic points the company is emphasizing to investors:
- Customer Order Recovery: Leadership stated that ordering activity from the impacted large customer is "beginning to return to more normalized levels" in the current quarter.
- New Business and Competitive Shifts: The company pointed to "significant new business commitments" stemming from a changing competitive landscape, including a competitor's bankruptcy. It also noted strong momentum in brake-related product sales.
- Financial Position and Shareholder Returns: Management highlighted a solid balance sheet with approximately $146 million in available liquidity. The company continues to actively repurchase shares, buying back 381,562 shares for $5.0 million during the Q3. Net bank debt was reduced to $70.5 million.
- Strategic Review for EV Unit: Notably, the company announced it is "pursuing strategic alternatives for EV technology," indicating a potential divestiture of its electric vehicle testing solutions subsidiary to focus on its core automotive hard parts business.
Looking Ahead
The quarter presents a mixed picture for Motorcar Parts of America. While the immediate financial results and lowered guidance are clear negatives, the company frames the sales shortfall as a temporary issue that is already correcting. The focus for investors will now shift to the company's execution in the fourth quarter to see if it can capitalize on the returning customer demand and new business wins to bridge the gap between its guidance and previous analyst expectations. The potential divestiture of the EV technology segment could also streamline operations and provide capital for the core business.
For a detailed look at historical earnings, future estimates, and analyst projections, you can review the earnings and estimates data for MPAA.
Disclaimer: This article is for informational purposes only and is not intended as investment advice. The analysis is based on publicly available data and the author's interpretation. Investors should conduct their own research and consult with a qualified financial advisor before making any investment decisions.
