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Sensata (ST) Up 0.8% Since Last Earnings Report: Can It Continue?
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It has been about a month since the last earnings report for Sensata (ST - Free Report) . Shares have added about 0.8% 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 Q4 Earnings Top Estimates
Sensata delivered impressive fourth-quarter 2021 results, with the bottom line and the top line surpassing their respective Zacks Consensus Estimate.
On an adjusted basis, the company reported earnings of 87 cents per share compared with 85 cents per share reported in the year-ago quarter. The bottom line surpassed the Zacks Consensus Estimate by 7.4%
Quarterly revenues aggregated $934.6 million up 3.1% from the year-ago quarter. The top line beat the consensus estimate by 2%. Acquisitions and favorable currency changes acted as the driving factors.
Despite production declines due to constraints stemming from semiconductor and other component shortages, the company witnessed significant outgrowth in the face of evolving supply chain landscape and market conditions. ST’s flexible business model is a major tailwind that enabled it to deliver solid results. This indicates healthy prospects for Sensata’s core sensing operations, which will accelerate growth momentum in the long run.
The company is expanding its electrification ecosystem to facilitate the seamless transition to electric vehicles as it aims to be a leading provider of mission-critical sensor-rich hardware and software solutions. Sensata has a rich portfolio of high-voltage protection and battery management systems. The recent joint venture with Churod Electronics expanded its electrical protection capabilities for mass-market applications. The acquisitions of Spear Power Systems in Clean Energy Solutions and SmartWitness in Sensata Insights boost its long-term growth strategy.
Segment Results
Performance Sensing revenues (73.3% of total revenues) dropped 0.6% year over year to $685.1 million, owing to a decline in OEM production stemming from supply chain disruptions. However, strong outgrowth and acquisitions acted as tailwinds. Segment operating income was $185.6 million compared with $185.1 million reported in the prior-year quarter on higher revenues from acquisitions and favorable foreign exchange. This was partly offset by lower organic volume.
Sensing Solutions revenues (26.7% of total revenues) increased to $249.5 million from $217.5 million in the year-ago quarter. The year-over-year improvement was led by ramped-up production of electric vehicles and an uptrend in HVAC (heating, ventilation, and air conditioning) business. The segment’s operating income increased to $74.5 million from $70.7 million, mainly due to higher volumes partly offset by supply chain costs.
Other Details
Overall organic revenues were down 0.9% year over year. Heavy vehicle off-road business reported organic revenue growth of 16.4%. The automotive business witnessed a 11.7% decline in organic revenue growth. The industrial business rose 16.1% organically as global industrial end markets continued to recover. The aerospace business witnessed a 0.6% drop in organic revenues. Total operating expenses were $784.9 million compared with $752.3 million in the prior-year quarter, primarily due to the higher cost of revenues. Adjusted operating income was $197.6 million, up from $195.6 million in the year-ago quarter. The uptick was mainly caused by acquisitions and favorable forex volatility. The same was partially offset by higher expenses toward megatrend growth initiatives and lower organic volumes. Adjusted EBITDA totaled $228.7 million during the quarter, up from $228 million.
Cash Flow & Liquidity
In 2021, Sensata generated $554.2 million of net cash from operating activities compared with $559.8 million in the prior year. Free cash flow came in at $409.7 million compared with $453.1 million a year ago.
As of Dec 31, 2021, the company had $1,709 million in cash and cash equivalents with $4,214.9 million of net long-term debt.
In the quarter under review, the company resumed share buybacks and repurchased $48 million worth of shares. The company also recently announced a new $500 share repurchase program.
Guidance
Sensata provided guidance for the first quarter of 2022. For the quarter, the company expects revenues in the range of $935-$975 million, suggesting a year-over-year change between a decline of 1% and a 3% rise. Adjusted earnings per share are estimated in the band of 70-78 cents, calling for a year-over-year decline of 9-19%. Adjusted net income is expected to be $112-$124 million, indicating a year-over-year decline between 10% and 19%.
For 2022, the company expects revenues in the range of $4.125-$4.275 billion, suggesting year-over-year growth between 8% and 12%. Adjusted earnings per share are estimated in the band of $3.80-$4.06, calling for year-over-year growth between 7% and 14%. Adjusted net income is expected to be $600-$640 million, indicating a year-over-year growth between 6% and 13%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
The consensus estimate has shifted -12.06% due to these changes.
VGM Scores
At this time, Sensata has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. 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 A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
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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Sensata (ST) Up 0.8% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Sensata (ST - Free Report) . Shares have added about 0.8% 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 Q4 Earnings Top Estimates
Sensata delivered impressive fourth-quarter 2021 results, with the bottom line and the top line surpassing their respective Zacks Consensus Estimate.
On an adjusted basis, the company reported earnings of 87 cents per share compared with 85 cents per share reported in the year-ago quarter. The bottom line surpassed the Zacks Consensus Estimate by 7.4%
Quarterly revenues aggregated $934.6 million up 3.1% from the year-ago quarter. The top line beat the consensus estimate by 2%. Acquisitions and favorable currency changes acted as the driving factors.
Despite production declines due to constraints stemming from semiconductor and other component shortages, the company witnessed significant outgrowth in the face of evolving supply chain landscape and market conditions. ST’s flexible business model is a major tailwind that enabled it to deliver solid results. This indicates healthy prospects for Sensata’s core sensing operations, which will accelerate growth momentum in the long run.
The company is expanding its electrification ecosystem to facilitate the seamless transition to electric vehicles as it aims to be a leading provider of mission-critical sensor-rich hardware and software solutions. Sensata has a rich portfolio of high-voltage protection and battery management systems. The recent joint venture with Churod Electronics expanded its electrical protection capabilities for mass-market applications. The acquisitions of Spear Power Systems in Clean Energy Solutions and SmartWitness in Sensata Insights boost its long-term growth strategy.
Segment Results
Performance Sensing revenues (73.3% of total revenues) dropped 0.6% year over year to $685.1 million, owing to a decline in OEM production stemming from supply chain disruptions. However, strong outgrowth and acquisitions acted as tailwinds. Segment operating income was $185.6 million compared with $185.1 million reported in the prior-year quarter on higher revenues from acquisitions and favorable foreign exchange. This was partly offset by lower organic volume.
Sensing Solutions revenues (26.7% of total revenues) increased to $249.5 million from $217.5 million in the year-ago quarter. The year-over-year improvement was led by ramped-up production of electric vehicles and an uptrend in HVAC (heating, ventilation, and air conditioning) business. The segment’s operating income increased to $74.5 million from $70.7 million, mainly due to higher volumes partly offset by supply chain costs.
Other Details
Overall organic revenues were down 0.9% year over year. Heavy vehicle off-road business reported organic revenue growth of 16.4%. The automotive business witnessed a 11.7% decline in organic revenue growth. The industrial business rose 16.1% organically as global industrial end markets continued to recover. The aerospace business witnessed a 0.6% drop in organic revenues.
Total operating expenses were $784.9 million compared with $752.3 million in the prior-year quarter, primarily due to the higher cost of revenues. Adjusted operating income was $197.6 million, up from $195.6 million in the year-ago quarter. The uptick was mainly caused by acquisitions and favorable forex volatility. The same was partially offset by higher expenses toward megatrend growth initiatives and lower organic volumes. Adjusted EBITDA totaled $228.7 million during the quarter, up from $228 million.
Cash Flow & Liquidity
In 2021, Sensata generated $554.2 million of net cash from operating activities compared with $559.8 million in the prior year. Free cash flow came in at $409.7 million compared with $453.1 million a year ago.
As of Dec 31, 2021, the company had $1,709 million in cash and cash equivalents with $4,214.9 million of net long-term debt.
In the quarter under review, the company resumed share buybacks and repurchased $48 million worth of shares. The company also recently announced a new $500 share repurchase program.
Guidance
Sensata provided guidance for the first quarter of 2022. For the quarter, the company expects revenues in the range of $935-$975 million, suggesting a year-over-year change between a decline of 1% and a 3% rise. Adjusted earnings per share are estimated in the band of 70-78 cents, calling for a year-over-year decline of 9-19%. Adjusted net income is expected to be $112-$124 million, indicating a year-over-year decline between 10% and 19%.
For 2022, the company expects revenues in the range of $4.125-$4.275 billion, suggesting year-over-year growth between 8% and 12%. Adjusted earnings per share are estimated in the band of $3.80-$4.06, calling for year-over-year growth between 7% and 14%. Adjusted net income is expected to be $600-$640 million, indicating a year-over-year growth between 6% and 13%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
The consensus estimate has shifted -12.06% due to these changes.
VGM Scores
At this time, Sensata has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. 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 A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
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.