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Delphi Technologies (DLPH) Down 2.8% Since Earnings Report: Can It Rebound?

Zacks Equity Research
Updated

A month has gone by since the last earnings report for Delphi Technologies PLC DLPH. Shares have lost about 2.8% in that time frame.

Will the recent negative trend continue leading up to its next earnings release, or is DLPH 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 drivers.

Delphi Automotive Q3 Earnings Beat Estimates, Up Y/Y

Delphi Automotive posted $1.66 per share of adjusted earnings in the third quarter of 2017, up from $1.5 earned in the prior-year quarter. The bottom line surpassed the Zacks Consensus Estimate of $1.56.

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Adjusted net income increased to $443 million from $409 million a year ago. This figure includes the advantageous impact of reduced share count and lower tax rate.

Revenues were $4.33 billion and surpassed the Zacks Consensus Estimate of $4.09 billion.

The top line increased 6% year over year, excluding the impact of currency exchange, commodity movements and divestitures. This upside was led by improved performances across South America (25%), Europe (6%) and Asia (19%), partly offset by a decline of 8% in North America.

Adjusted operating income rose to $566 million from $534 million in the third quarter of 2016. Adjusted operating margin was 13.1%, consistent with the year-ago quarter. This reflects sales growth of the company as well as the positive impact of its cost-reduction initiatives. However, growth-oriented investments and Mechatronics divestiture partly offset this upside.

Segment Details

In the Electrical/Electronic Architecture segment, revenues inched up 1% to $2.3 billion in the reported quarter. Also, adjusted operating income gained 6% to $336 million.

In the Powertrain Systems segment, revenues rose 12% to $1.2 billion. Adjusted operating income rallied 23% to $150 million.

The Electronics and Safety segment’s revenues increased 11% to $845 million. However, adjusted operating income declined 16% to $80 million.

Share Repurchases

In third-quarter 2017, Delphi Automotive repurchased 1.02 million shares for approximately $95 million. Following this, the company had approximately $989 million available for future repurchases under its current share buyback program.

Financial Position

As of Sep 30, 2017, Delphi Automotive had cash and cash equivalents of $557 million compared with $838 million as of Dec 31, 2016. Total long-term debt increased to $4.9 billion as of Sep 30, 2017 compared with $4 billion as of Dec 31, 2016.

At the end of nine months of fiscal 2017, operating cash flow decreased to $1.1 billion from $1.3 billion during the same period in 2016. Again in the same time frame, capital expenditure totaled $591 million compared with $614 million a year ago.

Outlook

For 2017, Delphi Automotive increased its revenue expectation to $17.35-$17.45 billion compared with the previous expectation of $16.85-$17.05 billion. Adjusted earnings per share are expected in the range of $6.7-$6.8 compared with the previous guidance of $6.55-$6.75.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. There has been one revision higher for the current quarter compared to three lower.

Delphi Technologies PLC Price and Consensus

 

Delphi Technologies PLC Price and Consensus | Delphi Technologies PLC Quote

VGM Scores

At this time, DLPH has a great Growth Score of A, though it is lagging a lot on the momentum front with an F. The stock was also allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Zacks''style scores indicate that the company's stock is suitable for value and growth investors.

Outlook

Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. Interestingly, DLPH has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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