A month has gone by since the last earnings report for Gentex (GNTX). Shares have added about 9.9% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Gentex due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Gentex Delivers Dismal Q1 Show
Gentex reported first-quarter 2020 earnings per share of 36 cents, missing the Zacks Consensus Estimate by a penny. Weaker-than-expected automotive net sales resulted in the underperformance. Precisely, first-quarter automotive net sales totaled $439.9 million, lagging the consensus mark of $463 million.
The bottom line also declined from the year-ago earnings of 40 cents per share.Coronavirus-induced shutdowns in various parts of Asia, Europe and North America dented revenues and earnings of the automatic-dimming rearview-mirror specialist in first-quarter 2020.
During the quarter under review, total revenues came in at $453.7 million, which missed the Zacks Consensus Estimate of $467 million. Moreover, the top line fell from the year-ago figure of $468.6 million.
The company recorded gross margin of 34.5% in the quarter under review, down from the year-ago quarter’s 36.2% due to lost revenues amid coronavirus and annual customer price reductions.
In the quarter, auto-dimming mirror shipments in the North America market dropped 6% from the prior-year quarter to 3.2 million units. In the International market, the same fell 1% from the prior-year quarter to 7.1 million units. Total shipments also declined 3% year over year to 10.4 million units, as global light vehicle production dwindled 24% in the first quarter of 2020.
Operating expenses increased 7% year over year to $51.6 million in first-quarter 2020. Product launches and higher R&D costs drove total expenses. SG&A expenses rose to $21.9 million from $19.9 million in the year-ago quarter. Engineering and R&D expenses increased to $29.6 million in first-quarter 2020 from $28.1 million recorded in the year-ago period.
Buyback & Dividend
During the quarter under review, the company repurchased approximately 7 million shares of its common stock at $25.48 per share. As of Mar 31, 2020, Gentex had around 13 million shares remaining under the buyback program. During the quarter, it announced a 4% payout hike, representing the 10th consecutive year of dividend increase. While most of the companies are suspending dividends and share buybacks to conserve cash amid the pandemic-led financial crisis, Gentex remains committed to preserve shareholder values. Notably, the company had cash and cash equivalents of $278.5 million as of Mar 31, 2020.
2020 Guidance Trimmed
Things are worsening for the auto sector amid the COVID-19 pandemic, as is evident from factory closures and depressed demand for vehicles amid weak consumer confidence. IHS Markit expects total light vehicle production to decline 20% year over year in 2020. Given the dreary scenario, Gentex has downwardly revised its guidance for 2020. The company now envisions net sales in the band of $1.58-$1.67 billion, down from its previous guidance range of $1.91-$2 billion. Gross margin is anticipated in the range of 34-35% compared with the prior guided range of 36-37%. Capex and operating expenses are estimated within $60-$70 million and $195-$205 million, respectively. Amid coronavirus-led uncertainty, Gentex is withdrawing revenue forecast for 2021.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review. The consensus estimate has shifted -57.53% due to these changes.
At this time, Gentex has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Gentex has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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