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Multiple Acquisitions Benefit Aptiv Despite Escalating Costs

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Aptiv PLC (APTV - Free Report) finds a competitive edge in the market, driven by its smart architecture. It is well-positioned to benefit from the lucrative connected cars market. Frequent acquisitions enable the company to improve its organic and inorganic growth. However, rapid investments increase costs.

APTV reported mixed second-quarter 2024 results. Adjusted earnings of $1.58 per share beat the Zacks Consensus Estimate by 15.3% and increased 26.4% year over year. Revenues of $5.1 billion missed the Zacks Consensus Estimate by 5.1% and decreased 2.9% year over year.

Aptiv PLC Revenue (TTM)

 

Aptiv PLC Revenue (TTM)

Aptiv PLC revenue-ttm | Aptiv PLC Quote

How is Aptiv Faring?

APTV benefits from the lucrative connected cars market. The rise in requirement for security is becoming a key selling point for connected cars, thereby compelling automakers to seek related technologies. This need has led to the quick advancement of the driver-assistance system market. Demand for personalization, infotainment connectivity and convenience are increasing at a rapid pace, which requires more wiring inside vehicles. We anticipate Aptiv to leverage the growing electrification, connectivity and autonomy trends in the automotive sector.

The company’s competitive advantage lies in “smart architecture” and should enable it to capture greater market share. Shrinking environmental impacts and increasing fuel economy are the key industry trends, and original equipment manufacturers have increased their search for better engine management and lower power consumption. Aptiv intends to ride this trend as its “smart architecture” lessens wiring requirements in cars, enabling them to become more fuel-efficient and add features.

APTV acquired Hohle Ltd. in 2023, strengthening the company's Signal and Power Solutions segment. In 2022, Aptiv acquired Wind River, which expanded its position in the automotive software solutions market. Intercable Automotive Solutions was also acquired in 2022, strengthening APTV’s position as a global leader in vehicle architecture systems.

Aptiv seeks to continue making investments focused on organic and inorganic growth. The periodic acquisitions that the company makes generate cost synergies, which raise the efficiency of the combined company.

Meanwhile, APTV is witnessing an escalation in costs as it continues to invest in organic and inorganic growth, and remains engrossed in legal matters. It takes a few years to generate revenues from the investments and can take even longer, given a weak demand environment.

Zacks Rank & Stocks to Consider

APTV currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader Zacks Business Services sector are Lightspeed POS (LSPD - Free Report) and Jamf (JAMF - Free Report) .

Lightspeed POS flaunts a Zacks Rank of 1 (Strong Buy) at present. It has a long-term earnings growth expectation of 33.4%.

You can see the complete list of today’s Zacks #1 Rank stocks here.

LSPD delivered a trailing four-quarter earnings surprise of 188.3%, on average.

Jamf currently carries a Zacks Rank of 2 (Buy). It has a long-term earnings growth expectation of 57%. JAMF delivered a trailing four-quarter earnings surprise of 15.7%, on average.


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