It has been about a month since the last earnings report for Sensata (ST). Shares have added about 1.2% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Sensata due for a pullback? 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 Q1 Earnings Top Estimates
Sensata delivered healthy first-quarter 2022 results, with the bottom and top lines surpassing the Zacks Consensus Estimate.
On an adjusted basis, the company reported earnings of 78 cents per share compared with 86 cents reported in the year-ago quarter. The bottom line surpassed the Zacks Consensus Estimate by 2.6%.
Quarterly revenues aggregated $975.8 million, up 3.5% year over year. The top line beat the consensus estimate by 1.9%. Acquisitions acted as tailwinds, but unfavorable currency changes reduced revenues by 0.6%.
Performance Sensing revenues (73.6% of the total revenues) increased 0.5% year over year to $717.7. Strong outgrowth and acquisitions offset losses in OEM production due to supply-chain restrictions, resulting in almost flat revenues. Segment operating income was $180.6 million compared with $195.8 million reported in the prior-year quarter. Lower organic volumes and increased supply-chain costs offset the benefits achieved from higher pricing, acquisitions and positive foreign exchange fluctuations.
Sensing Solutions revenues (26.4% of total revenues) increased to $258 million, up 13.2% from the year-ago quarter. The year-over-year improvement was led by the latest electrification launches and revenues from acquisitions. The segment’s operating income increased to $72.5 million from $66.9 million mainly due to higher volumes, partly offset by supply-chain costs.
Overall organic revenues were flat year over year. The heavy vehicle off-road business reported organic revenue growth of 2.5%. The automotive business witnessed a 5.8% decline in organic revenue growth. The industrial business rose 13.3% organically as global industrial end markets continued to recover. The aerospace business witnessed a 1.8% increase in organic revenues.
Total operating expenses were $849.8 million compared with $785 million in the prior-year quarter primarily due to the higher cost of revenues, and selling, general and administrative expenses. Adjusted operating income was $182.5 million, down from $198.1 million in the year-ago quarter.
The downtick was mainly caused by reduced organic volumes and higher investments.
Adjusted EBITDA totaled $214.8 million in the quarter, down from $227.6 million in the previous quarter.
Cash Flow & Liquidity
In the quarter under review, Sensata generated $47.3 million of net cash from operating activities compared with $104.5 million in the prior year. Free cash flow was $11.6 million compared with $77.3 million a year ago.
As of Mar 31, 2022, the company had $1,608 million in cash and cash equivalents, with $4,215 million of net long-term debt.
In the quarter under review, Sensata repurchased 1.1 million shares worth $67.3 million.
Sensata provided guidance for the second quarter of 2022. For the quarter, the company expects revenues of $990-$1,030 million, suggesting flat to a 4% rise year over year.
Adjusted earnings per share are estimated to be 79-87 cents, implying a year-over-year decline of 8-17%. Adjusted net income is expected to be $125-137 million, indicating a year-over-year decline of 10-17%.
For 2022, the company expects revenues of $4.125-$4.275 billion, suggesting year-over-year growth of 8-12%. Adjusted earnings per share are estimated to be $3.80-$4.06, implying year-over-year growth of 7-14%. Adjusted net income is expected to be $600-$640 million, indicating year-over-year growth of 6-13%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
The consensus estimate has shifted -10.35% due to these changes.
At this time, Sensata has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, 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 C. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Sensata has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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