Delphi Technologies PLC DLPH has an expected long-term earnings per share (three to five years) growth rate of 9%. Further, earnings are expected to register 17.4% growth in 2020.
However, the company faces its share of headwinds. Delphi Technologies' operation in the global automotive component supply industry remains a major concern. The industry is subject to stiff competition, rapid technological changes, short product life cycles and cyclical consumer demand patterns. High debt may limit the company’s future expansion and worsen its risk profile. Seasonality causes considerable fluctuations in revenues and profits and makes forecasting difficult. Despite these headwinds, we believe that the company has enough positives that justify the stock’s retention in investors’ portfolio.
A Look at the Positives
Delphi Technologies has a geographically diverse revenue base. The company operates in 24 countries, managing technical centers, manufacturing sites and customer support services. Region-wise, it derived 44% of revenues from Europe, 28% from North America, 25% from the Asia Pacific and 3% from South America in 2018.
Regional presence coupled with its diversified and innovative product portfolio with updated technologies makes Delphi Technologies a solid choice for original equipment manufacturers (OEMs). This is because OEMs are focused on increasing efficiency and expanding their global manufacturing footprint by choosing suppliers with global scale who can easily adapt to regional variations. In 2018, within the Powertrain Systems segment, 72% of net sales came from light vehicle OEM customers and 28% from commercial vehicle OEM customers.
Furthermore, the company’s aftermarket business continues to generate stable recurring revenues
Zacks Rank & Stocks to Consider
Delphi currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
A few better-ranked stocks in the broader Zacks Business Services sector are Navigant Consulting NCI, NV5 Global NVEE and FLEETCOR Technologies FLT. While Navigant Consulting and NV5 Global sport a Zacks Rank #1, FLEETCOR carries a Zacks Rank #2 (Buy).
Long-term expected EPS (three to five years) growth rate for Navigant Consulting, FLEETCOR and NV5 Global is 13.5%, 15.4% and 20%, respectively.
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