Gentex Q2 Earnings in Line with Estimates, Revenues Miss
Gentex Corp. (GNTX) reported adjusted earnings per share of 48 cents in the second quarter of 2014, in line with the Zacks Consensus Estimate. Adjusted earnings increased 33% from 36 cents in the second quarter of 2013.
Including the favorable impact of incremental research and development tax credits related to Gentex’s tax return filings for calendar years 2010–2012, earnings (on a reported basis) amounted to 52 cents per share, up 44% from 36 cents in the year-ago quarter. Net income came in at $76.7 million in the second quarter of 2014, up 47% from $52.1 million in the second quarter of 2013.
Gentex’s net sales amounted to $338.4 million, missing the Zacks Consensus Estimate of $343 million. Net sales increased 18% from $287 million in the second quarter of 2013. The increase in sales was driven by strong market penetration for the HomeLink applications, inside and outside electrochromic mirrors, and SmartBeam and driver assist camera systems.
Gross profit margin rose to 39.7% from 35.8% in the second quarter of 2013. The increase was driven by the impact of the HomeLink acquisition, improvements in product mix, and purchasing cost reductions, which were partially offset by annual customer price reductions.
Segment Results
Automotive Products: Automotive net sales amounted to $329.6 million in the reported quarter, increasing 18% from $279.8 million in the second quarter of 2013. Automotive mirror unit shipments increased 12% year over year, mainly due to higher unit shipments of the interior and exterior auto-dimming rearview mirrors.
Others: Other net sales (including dimmable aircraft windows and fire protection products) were $8.8 million in the reported quarter, rising 24% from $7.2 million in the year-ago quarter.
Financial Position
Gentex had cash and cash equivalents of $391.7 million as of Jun 30, 2014, increasing from $309.6 million as of Dec 31, 2013. Long-term debt decreased to $261.9 million from $265.6 million as of Dec 31, 2013.
Guidance
Gentex expects net sales to increase 15–20% year over year in the third quarter of 2014 based on the Jul 2014 IHS production forecast and current forecasted product mix. Gross profit margin in the third quarter of 2014 is expected to be approximately 39.5–40%.
Engineering, research & development (ER&D) expenses are expected to increase 5–10% year over year in the third quarter, while selling, general & administrative (SG&A) expenses are projected to rise 10% from the third quarter of 2013.
Gentex currently carries a Zacks Rank #2 (Buy). Some other automobile stocks worth considering include Meritor, Inc. (MTOR), Magna International Inc. (MGA) and Visteon Corporation (VC). Visteon sports a Zacks Rank #1 (Strong Buy), while Meritor and Magna International have a Zacks Rank #2.
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