Why Is Sensata (ST) Down 3.5% Since Last Earnings Report?
It has been about a month since the last earnings report for Sensata (ST). Shares have lost about 3.5% in that time frame, outperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Sensata due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Sensata Q4 Earnings & Revenues Top Estimates
Sensata reported strong fourth-quarter 2022 results, with the top and bottom lines surpassing the Zacks Consensus Estimate.
On an adjusted basis, the company reported earnings of 96 cents per share compared with 87 cents reported in the year-ago quarter. The bottom line surpassed the Zacks Consensus Estimate of 88 cents per share.
Quarterly revenues aggregated $1,014.7 million, up 8.6% year over year. The top line beat the consensus estimate by 1.8%. Acquisitions acted as tailwinds, but unfavorable currency changes reduced revenues by 3.6%
Segmental Results
Performance Sensing revenues (74.7% of the total revenues) increased 10.6% year over year to $757.7 million. The Automotive sector benefited from strong content growth, price realization and strong market growth partly offset by unfavorable foreign currency movement. Segment operating income was $196.9 million compared with $185.6 million reported in the prior-year quarter.
Sensing Solutions revenues (25.3% of total revenues) were $257 million, up 3% from the year-ago quarter. The year-over-year improvement was led by the latest electrification launches and revenues from acquisitions, partially offset by unfavorable foreign currency movement and softness in HVAC and appliance markets.
The segment’s operating income decreased to $74.4 million from $74.5 million, mainly due to the dilutive impact of acquisitions.
Other details
In the quarter under review, overall organic revenues were up 10%. The heavy vehicle off-road business witnessed a 0.7% decline in organic revenue growth. The automotive business reported organic revenue growth of 18.5%. The industrial business declined 0.5% organically. The aerospace business witnessed a 24.1% increase in organic revenues.
Total operating expenses were $862.3 million, up 9.9% compared with the prior-year quarter, primarily due to higher restructuring charges. Adjusted operating income was $204.3 million, up 3.4% compared with the year-ago quarter. The uptick was mainly caused by the favorable volumes, pricing and productivity improvements, partially offset by unfavorable movements in foreign currency, investments in Electrification and Insights and divestiture of our Qinex semiconductor test and thermal business.
Adjusted EBITDA totaled $244.5 million in the quarter, up from $228.7 million in the previous year’s quarter.
Cash Flow & Liquidity
In the quarter under review, Sensata generated $224.9 million of net cash from operating activities compared with $160.9 million in the prior year. Free cash flow was $185.2 million compared with $116.9 million a year ago.
As of Dec 31, 2022, the company had $1,225.5 million in cash and cash equivalents, with $3,958.9 million of net long-term debt compared with $1,103.9 million and $4,208.7 million, respectively, as of Sep 30, 2022.
In the quarter under review, Sensata repurchased shares worth $50.4 million.
Guidance
Sensata provided guidance for the first quarter of 2023. For the quarter, the company expects revenues of $950-$1,000 million, suggesting a decline of 3% to a rise of 3% year over year. Adjusted operating income is expected to be $182-198 million, indicating a year-over-year rise of 8% or remaining flat.
Adjusted earnings per share are estimated to be 81-91 cents, suggesting a rise of 4 to 17%. Adjusted net income is expected to be $125-139 million, suggesting a year-over-year rise of 1 to 13%.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended upward during the past month.
VGM Scores
At this time, Sensata has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Sensata has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Sensata belongs to the Zacks Instruments - Control industry. Another stock from the same industry, Badger Meter (BMI), has gained 0.9% over the past month. More than a month has passed since the company reported results for the quarter ended December 2022.
Badger Meter reported revenues of $147.32 million in the last reported quarter, representing a year-over-year change of +8.5%. EPS of $0.60 for the same period compares with $0.59 a year ago.
Badger Meter is expected to post earnings of $0.59 per share for the current quarter, representing a year-over-year change of +20.4%. Over the last 30 days, the Zacks Consensus Estimate has changed -6.4%.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #2 (Buy) for Badger Meter. Also, the stock has a VGM Score of D.
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Sensata Technologies Holding N.V. (ST) : Free Stock Analysis Report
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