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Bear of the Day: Visteon Corporation (VC)

Benjamin Rains

Visteon Corporation (VC) shares have tumbled 20% since the company reported disappointing first-quarter 2019 results in April. Looking ahead, the cockpit electronics and connected-car technology firm’s full-year fiscal 2019 earnings are projected to tumble.

Quick Overview

Visteon designs, engineers, and manufactures cockpit electronics and connected car solutions. The Van Buren Township, Michigan-headquartered firm could be in a position to capitalize on the long-term digitalization of the auto industry as vehicle displays look more and more like something out of a science fiction novel. With that said, Visteon posted a massive first quarter earnings miss.

The firm posted adjusted Q1 earnings of $0.53 per share, when our Zacks Consensus Estimate called for $1.06 per share. On top of that, Visteon’s quarterly revenue slipped from $814 million in the year-ago period to $737 million. The company blamed the top-line drop on “unfavorable vehicle production volumes, customer pricing net of design changes, and unfavorable currency.” Meanwhile, executives said the margin crunch, which led to the big earning miss, was caused by “lower sales, launch challenges with a curved center information display, inefficiencies associated with a plant transfer in Mexico, and timing of engineering expense.”

Visteon CEO Sachin Lawande said he expects the operational challenges that hurt margins last quarter to diminish and be largely resolved in the second and third quarters. Despite the positivity from executives, Wall Street hasn’t been kind to VC stock. In fact, shares of Visteon have plummeted roughly 60% over the last 12 months, as part of a larger rollercoaster ride over the past five years. Visteon closed regular trading Tuesday at $54.79 per share.

 

 

Outlook & Earnings Trends

Looking ahead to Q2, the connected car tech firm’s revenue is projected to slip 3.3% from $758.00 million in the prior-year quarter to $732.72 million, based on our current Zacks Consensus Estimate. The company’s full-year fiscal 2019 revenue is projected to slip 1.8% to $2.93 billion.

Moving onto the bottom end of the income statement, the company’s adjusted second-quarter earnings are projected to decline roughly 71% from $1.37 in Q2 2018 to $0.40 per share. VC’s Q3 EPS figure is then expected to dip 1.8%. Overall, full-year earnings are projected to fall 38.5%, driven by Q1’s downturn and Q2’s projected decline.

Furthermore, the company’s earnings estimates have trended heavily in the wrong direction recently. More specifically, the company’s 2019, 2020, and 2021 earnings estimates have tumbled for some time now.

 

 

Bottom Line

Visteon’s negative earnings estimate revision picture helps the company earn a Zacks Rank #5 (Strong Sell) at the moment. VC also sports an “F” grade for Momentum in our Style Scores system. It is worth noting that the company is projected to rebound slightly on both the top and bottom lines in 2020 from the projected 2019 downturns. But until Visteon shows some signs of a turnaround, investors are probably best served to stay away.

Those still interested in Automotive – Original Equipment industry might instead take a look at #1 (Strong Buy)-ranked Allison Transmission Holdings, Inc. (ALSN) or #2 (Buy)-ranked Dana Incorporated (DAN).

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