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Here's Why You Should Retain Aptiv (APTV) in Your Portfolio

Zacks Equity Research

Aptiv PLC APTV remains well poised to benefit from the rapidly growing global automotive safety system market.

The company has an impressive Growth Score of B. This style score condenses all the essential metrics from the company’s financial statements to get a true sense of the quality and sustainability of its growth. Aptiv’s long-term (five years) earnings growth is pegged at 11.1%.

What’s Aiding the Stock?

Prospects over Aptiv’s exposure to the lucrative connected cars market are benefitting its stock that has gained 34.7% year to date, significantly outperforming the 8.5% rally of the industry.

 

With safety becoming a key selling point for these cars, automakers are increasingly seeking related technologies. According to Stratistics MRC, the global automotive safety system market will grow from $76.5 billion in 2016 to $169.46 billion in 2025 at a CAGR of 9.36%. Aptiv being a leading provider of vehicle safety solutions is well positioned to benefit from this trend.

Demand for personalization, infotainment connectivity and convenience are also increasing rapidly. These added features require more wiring inside vehicles. We believe that with excellent system integration expertise, Aptiv is also well positioned to leverage on electrification, connectivity and autonomy trends in the automotive sector.

Decreasing environmental impact and increasing fuel economy is a key trend in the industry today and OEMs have increased their search for better engine management and lower power consumption. Aptiv should benefit from this trend as its “smart architecture” reduces wiring requirement in cars, thus helping them to become more fuel efficient and add new features.

Some Headwinds

Currently, the global demand environment is pretty challenging. For this year, Aptiv expects global vehicle production to be down 4% with 13% decline in China and 4% in Europe.

Investments in products like autonomous driving software are expected to make meaningful contribution to the company’s growth after 2020, indicating that acceptance and integration of technology will take longer time.

Zacks Rank and Stocks to Consider

Aptiv currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader Zacks Business Services sector are Huron Consulting HURN, Western Union WU and CoreLogic CLGX. While Huron sport a Zacks Rank #1 (Strong Buy), Western Union and CoreLogic carry a Zacks Rank #2 (Buy).

Long-term earnings (three to five years) growth rate for Huron Consulting, CoreLogic and Western Union is estimated 13.5%, 11% and 9.6%, respectively. You can see the complete list of today’s Zacks #1 Rank stocks here.

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CoreLogic, Inc. (CLGX) : Free Stock Analysis Report
 
Huron Consulting Group Inc. (HURN) : Free Stock Analysis Report
 
The Western Union Company (WU) : Free Stock Analysis Report
 
Aptiv PLC (APTV) : Free Stock Analysis Report
 
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