Bear of the Day: Delphi Technologies (DLPH)

Delphi Technologies (DLPH) develops and designs powertrain technologies for original equipment manufacturers. It supplies a full suite of aftermarket products, including engine control modules, pumps, injectors, fuel modules, exhaust gas recirculation valves, brakes, steering and suspension.

Delphi is a recent spinoff of Delphi Automotive, which renamed itself Aptiv (APTV) last year. Aptiv’s main focus is autonomous driving and self-driving cars, and the software that powers these technologies.

Shares of DLPH have experienced a rocky stretch so far in 2018, down over 56% since the start of the year.

Its Q2 results were mixed overall. Earnings of $1.29 per share beat the Zacks Consensus, but revenues of $1.23 billion just fell short of our estimate.

Segment-wise, Delphi’s Powertrain Systems revenues were $1.09 billion, up 4.9% year-over-year thanks to strong growth in commercial vehicles and power electronics. Revenues for Delphi Technologies Aftermarket, however, fell 7.3% year-over-year.

While Delphi tightened its 2018 revenue and guidance at the time of its earnings release, the company just announced that it trimmed its revenue outlook even further for the year, as well as its margin projection, due to “challenging industry dynamics.”

The company now expects revenue growth to be flat compared to a previous forecast of up 2%-4%. Full-year operating margin is now expected in the range of 11.3%-11.5%, down from 12.1%-12.3%

On top of this, CEO Liam Butterworth recently stepped down from his role; he was chief executive for less than a year. Delphi said that director Hari Nair would be interim chief, and its board is currently looking for a permanent CEO. Shares plunged 13% after this news.

Delphi Technologies PLC Price and Consensus

Delphi Technologies PLC Price and Consensus | Delphi Technologies PLC Quote

Because of this string of disappointing news, five analysts have cut their estimate for fiscal 2018. The current consensus has fallen 28 cents from $4.82 to $4.54 in the last 60 days. The outlook for 2019 has fallen as well, down 58 cents during the same time period.

DLPH is now a #5 (Strong Sell) on the Zacks Rank.

Delphi is currently grappling with some major issues, from soft sales in its China and Europe regions to plateauing new vehicle sales in North America. Going forward, the company needs to find a new CEO, implement innovative business strategies to help revitalize revenue growth.

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