Aptiv PLC APTV is benefiting from its solid liquidity position and strategic acquisitions.
APTV’s earnings and revenues for 2022 are expected to improve 29% and 10.3%, respectively, from the corresponding year-ago reported figures. Shares of APTV have increased 19.6% in the past month compared with 2.3% growth of the industry it belongs to.
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Factors That Augur Well
Aptiv has a sound liquidity position. Its current ratio (a measure of liquidity) was 2.66 at the end of third-quarter 2022, higher than 2.63 at the end of the second quarter and 2.11 in the prior-year quarter. A current ratio greater than 1.5 is usually considered a tailwind. This may imply that the risk of default is less.
Acquisition is a key growth trajectory for Aptiv. In January 2022, APTV had announced that it inked a deal to purchase Wind River from TPG Capital. On completion, Wind River will be part of the acquirer’s Advanced Safety and User Experience segment.
Through this buyout, Aptiv will merge Wind River Studio offering with its complementary SVA platform and automotive expertise to strengthen its place in automotive software solutions. It will also enable APTV to equip automotive clients with a faster and economical path to full-vehicle software architecture.
Moreover, APTV is exposed to the lucrative connected cars market. With safety becoming a key selling point for connected cars, automakers are increasingly seeking related technologies. This is one of the reasons behind the quick advancement of the driver-assistance system market.
A Key Risk
Aptiv is witnessing an escalation in costs as it continues to invest in both organic and inorganic growth, and remains embroiled in legal matters. Investments in products like autonomous driving software are expected to make meaningful contributions to APTV’s growth post 2022, indicating that acceptance and integration of technology will take longer time.
Zacks Rank and Stocks to Consider
Aptiv currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Some better-ranked stocks in the broader Zacks Business Services sector are Booz Allen Hamilton Holding Corporation BAH, Paychex, Inc. PAYX and Cross Country Healthcare, Inc. CCRN.
Booz Allen carries a Zacks Rank #2 (Buy) at present. BAH has a long-term earnings growth expectation of 8.9%.
Booz Allen delivered a trailing four-quarter earnings surprise of 8.8%, on average.
Paychex carries a Zacks Rank of 2 at present. PAYX has a long-term earnings growth expectation of 7.5%.
Paychex delivered a trailing four-quarter earnings surprise of 8.6%, on average.
Cross Country Healthcare is currently Zacks #2 Ranked. CCRN has a long-term earnings growth expectation of 6%.
CCRN delivered a trailing four-quarter earnings surprise of 10.1%, on average.
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