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Results: Aptiv PLC Exceeded Expectations And The Consensus Has Updated Its Estimates

Simply Wall St
·4 min read

A week ago, Aptiv PLC (NYSE:APTV) came out with a strong set of third-quarter numbers that could potentially lead to a re-rate of the stock. Aptiv delivered a significant beat to revenue and earnings per share (EPS) expectations, with sales hitting US$3.7b, some 11% above indicated. Statutory EPS were US$1.05, an impressive 58% ahead of forecasts. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.

See our latest analysis for Aptiv

earnings-and-revenue-growth
earnings-and-revenue-growth

Taking into account the latest results, the consensus forecast from Aptiv's 24 analysts is for revenues of US$14.9b in 2021, which would reflect a major 20% improvement in sales compared to the last 12 months. Statutory earnings per share are expected to plunge 46% to US$3.56 in the same period. In the lead-up to this report, the analysts had been modelling revenues of US$14.7b and earnings per share (EPS) of US$3.51 in 2021. The consensus analysts don't seem to have seen anything in these results that would have changed their view on the business, given there's been no major change to their estimates.

With the analysts reconfirming their revenue and earnings forecasts, it's surprising to see that the price target rose 5.8% to US$111. It looks as though they previously had some doubts over whether the business would live up to their expectations. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. There are some variant perceptions on Aptiv, with the most bullish analyst valuing it at US$150 and the most bearish at US$76.00 per share. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. The analysts are definitely expecting Aptiv's growth to accelerate, with the forecast 20% growth ranking favourably alongside historical growth of 0.02% per annum over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 12% next year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Aptiv to grow faster than the wider industry.

The Bottom Line

The most obvious conclusion is that there's been no major change in the business' prospects in recent times, with the analysts holding their earnings forecasts steady, in line with previous estimates. Happily, there were no major changes to revenue forecasts, with the business still expected to grow faster than the wider industry. We note an upgrade to the price target, suggesting that the analysts believes the intrinsic value of the business is likely to improve over time.

With that in mind, we wouldn't be too quick to come to a conclusion on Aptiv. Long-term earnings power is much more important than next year's profits. We have forecasts for Aptiv going out to 2024, and you can see them free on our platform here.

You should always think about risks though. Case in point, we've spotted 4 warning signs for Aptiv you should be aware of, and 1 of them makes us a bit uncomfortable.

This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.