Aptiv PLC APTV is currently benefitting from strategic buyouts and collaborations that are boosting the top line.
With expected long-term earnings per share (EPS) growth rate of 12.8% and a market cap of $16.2 billion, it is a stock that investors should retain in their portfolios.
Factors Driving Aptiv’s Performance
Aptiv is well poised to gain from secular trends related to connected cars. With safety becoming a key selling point for these cars, automakers are seeking related technologies. This is one of the reasons for the rapid improvement of the driver-assistance system market. Demand for personalization, infotainment connectivity and convenience are also increasing rapidly. Further, added features require more wiring inside vehicles. We believe that with excellent system integration expertise, the company is likely to leverage on growing electrification, connectivity and autonomy trends in the automotive sector.
Falling environmental impact and increasing fuel economy are key trends in the industry. Also, OEMs have increased their search for better engine management and lower power consumption. Aptiv intends to take advantage of this trend as its “smart architecture” reduces wiring requirement in cars, which makes them more fuel efficient and provide new features.
Higher investments in advanced technology and collaborations have enabled the company to explore opportunities in the rapidly growing automotive sector. On the technology front, the company has launched automated driving software, key active safety sensing technologies and Multi-Domain Controller.
Aptiv is also active on the partnership front. It has collaborated with Mobileye N.V. for joint development of Centralized Sensing Localization and Planning ("CSLP") system. Its collaboration with BMW and Intel for development and use of self-driving technology is also encouraging.
Acquisitions are key catalysts for Aptiv. So far in 2018, the company acquired KUM and Winchester Interconnect. The buyouts are expected to strengthen the Signal and Power Solutions segment. Aptiv’s acquisition strategy offers diverse product portfolio and establishes strong foothold in industrial end markets, which will boost the company’s top line.
Aptiv PLC Price, Consensus and EPS Surprise
Aptiv PLC Price, Consensus and EPS Surprise | Aptiv PLC Quote
In spite of significant growth prospects, Aptiv is not free from headwinds. The company is likely to witness escalation in costs as it plans to continue making investments in organic as well as inorganic growth, while being embroiled in a legal matter. Nevertheless, we believe that continued investments in technology and acquisitions bode well for the company’s top- and bottom-line growth.
Zacks Rank & Stocks to Consider
Currently, Aptiv 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 Zacks Business Services sector are Paychex, Inc. PAYX, Automatic Data Processing, Inc. ADP and Booz Allen Hamilton Holding Corporation BAH, each carrying a Zacks Rank #2 (Buy).
The long-term expected EPS (three to five years) growth rate for Paychex, Automatic Data Processing and Booz Allen is 8.8%, 12.5% and 14.4%, respectively.
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