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Sensata (ST) Raises Q4 Revenue Guidance on Solid Order Trends

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Zacks Equity Research
·4 min read
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Sensata Technologies Holding plc ST recently raised revenue guidance for fourth-quarter 2020 on better-than-expected order trends. Despite severe market conditions triggered by the coronavirus-induced adversities, the higher revenue expectations for the to-be-reported quarter exhibit the operating leverage of the company’s business model.

In concurrence with third-quarter results, Sensata had offered guidance for the fourth quarter that included adjusted earnings expectations in the band of 64-72 cents per share and adjusted net income of $100-$114 million. Although no business update was made available on these two metrics, management currently expects fourth-quarter revenues to lie within $902 million to $907 million, up from prior expectations of $810-$850 million. The improved revenue outlook is primarily driven by sustained business activities in Automotive and Industrial businesses which, in turn, translated into higher order schedules.

Catering to a wide range of customers from Tier 1 compressor suppliers to industrial manufacturers, Sensata shares a long-standing relationship with a geographically diverse base of multinational companies and leading original equipment manufacturers. It develops mission-critical sensor-rich solutions to address both current and evolving technological needs. Strong relationships combined with robust innovation capabilities serve as its key growth drivers. With these capabilities, the company is focused on establishing and optimizing a highly-efficient global manufacturing as well as supply chain network that has likely resulted in the healthy order flow.

Being a leading provider of mission-critical solutions, Sensata benefits from cost-effective operations. The company offers a streamlined set of products, which helps in eliminating redundant costs and gives it greater pricing flexibility. It invests in cutting-edge technology that enables the hybrid and electric vehicles to be more efficient, cost effective, robust and safe. Notably, Sensata’s sensing solutions business has a strong product portfolio and greater scale to capitalize on attractive opportunities in the $24.1-billion global automotive sensor market. Moreover, the company believes that its evolving portfolio and accretive customer base serve as the cornerstone for its long-term growth across a diverse set of markets.

With a diligent execution of operations, the company has been considerably outgrowing its end markets. Moreover, a strong balance sheet position enables Sensata to effectively capture mergers and acquisitions cost synergies with accelerated growth in industrial, aerospace and Heavy Vehicle & Off Road industries. Markedly, accretive collaborations and acquisitions have enabled Sensata to add new capabilities in wireless sensing and software, while generating stronger returns for shareholders.

The stock has gained 8.3% over the past year, while the industry has rallied 10.3%. Bottom-line estimates for 2020 have increased 11.4% in the past 90 days to $2.06 per share. Earnings estimates for 2021 have moved up 7.9% in the same time frame to $3.15 per share.

Sensata currently carries a Zacks Rank #2 (Buy). Some other top-ranked stocks in the broader industry are Comtech Telecommunications Corp. CMTL, sporting a Zacks Rank #1 (Strong Buy), and Qualcomm Incorporated QCOM and Sonim Technologies, Inc. SONM, carrying a Zacks Rank #2. You can see the complete list of today’s Zacks Rank #1 stocks here.

Comtech delivered a positive earnings surprise of 2%, on average, in the trailing four quarters.

Qualcomm has a long-term earnings growth expectation of 19.6%. It delivered a positive earnings surprise of 17.3% in the trailing four quarters, on average, beating estimates thrice.

Sonim delivered a positive earnings surprise of 2.2%, on average, in the trailing four quarters.    

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