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Delphi Gains From Product Suite Amid Light-Duty Diesel Woes
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Delphi Technologies PLC looks strong on the back of its vast global network and innovative product portfolio with updated technologies. The aftermarket business generates stable recurring revenues.
Delphi Technologies reported mixed second-quarter 2018 results, wherein earnings surpassed the Zacks Consensus Estimate but revenues missed the same. Adjusted earnings of $1.29 per share beat the consensus mark by 4 cents but fell short of the year-ago figure by 6 cents. Revenues of $1.23 billion missed the consensus mark by $62 million. However, the top line was up 4% year over year on a reported basis and 1% on an adjusted basis.
What’s Driving Delphi Technologies?
Delphi Technologies has a geographically diverse revenue base. Region-wise, it derived 45% of revenues from Europe, the Middle East and Africa (EMEA), 28% from North America, 24% from the Asia Pacific and 3% from South America in second-quarter 2018. Driven by growth in commercial vehicle and GDi, net sales from Europe grew almost 8.5% to $549 million in the quarter. This was partially offset by the ongoing decline in light-duty diesel revenues. Increasing levels of global vehicle production is encouraging.
Regional presence coupled with its diversified and innovative product portfolio with updated technologies should help Delphi Technologies become a solid choice for original equipment manufacturers (OEMs). This is because OEMS are focused on increasing efficiency and expanding their global manufacturing footprint by choosing suppliers with global scale who can easily adapt to regional variations.
The company’s aftermarket business generates stable recurring revenues. Through its aftermarket product portfolio, Delphi Technologies offers an extensive range of solutions, which includes fuel injection, electronics and engine management, maintenance, and test equipment and vehicle diagnostics categories, to leading aftermarket companies, including independent retailers and wholesale distributors. Demand for aftermarket products and services depends on the growing number of vehicles, their life-cycles and total miles covered.
Risks
Delphi Technologies continues to suffer from declining business from light duty diesel and GDi. In second-quarter 2018, passenger car light-duty diesel revenues declined approximately 15%, as lower sales in Europe offset growth in India and other Asian markets. European passenger car light-duty diesel sales declined around 20% year over year due to program roll-offs and lower market penetration. GDi revenues declined around 10% due to lower revenues in China.
Additionally, a debt-laden balance sheet is another major concern. As of Jun 30, 2018, long-term debt was $1.49 billion while cash and cash equivalents were $370 million. Such a cash position implies that Delphi Technologies needs to generate adequate amount of operating cash flow to service its debt.
So far this year, shares of Delphi Technologies have declined 20.5% against the 14.3% rise of the industry it belongs to.
Meanwhile, seasonality in business can cause considerable fluctuations in revenues and profits of Delphi Technologies, thereby making forecasting difficult. The company is also likely to suffer from spin-related and public company costs, which is anticipated to be around $70 million for 2018.
The long-term expected EPS (three to five years) growth rate for Genpact, Automatic Data Processing and Broadridge is 10%, 11.3% and 10%, respectively.
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Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
Image: Bigstock
Delphi Gains From Product Suite Amid Light-Duty Diesel Woes
Delphi Technologies PLC looks strong on the back of its vast global network and innovative product portfolio with updated technologies. The aftermarket business generates stable recurring revenues.
Delphi Technologies reported mixed second-quarter 2018 results, wherein earnings surpassed the Zacks Consensus Estimate but revenues missed the same. Adjusted earnings of $1.29 per share beat the consensus mark by 4 cents but fell short of the year-ago figure by 6 cents. Revenues of $1.23 billion missed the consensus mark by $62 million. However, the top line was up 4% year over year on a reported basis and 1% on an adjusted basis.
What’s Driving Delphi Technologies?
Delphi Technologies has a geographically diverse revenue base. Region-wise, it derived 45% of revenues from Europe, the Middle East and Africa (EMEA), 28% from North America, 24% from the Asia Pacific and 3% from South America in second-quarter 2018. Driven by growth in commercial vehicle and GDi, net sales from Europe grew almost 8.5% to $549 million in the quarter. This was partially offset by the ongoing decline in light-duty diesel revenues. Increasing levels of global vehicle production is encouraging.
Regional presence coupled with its diversified and innovative product portfolio with updated technologies should help Delphi Technologies become a solid choice for original equipment manufacturers (OEMs). This is because OEMS are focused on increasing efficiency and expanding their global manufacturing footprint by choosing suppliers with global scale who can easily adapt to regional variations.
The company’s aftermarket business generates stable recurring revenues. Through its aftermarket product portfolio, Delphi Technologies offers an extensive range of solutions, which includes fuel injection, electronics and engine management, maintenance, and test equipment and vehicle diagnostics categories, to leading aftermarket companies, including independent retailers and wholesale distributors. Demand for aftermarket products and services depends on the growing number of vehicles, their life-cycles and total miles covered.
Risks
Delphi Technologies continues to suffer from declining business from light duty diesel and GDi. In second-quarter 2018, passenger car light-duty diesel revenues declined approximately 15%, as lower sales in Europe offset growth in India and other Asian markets. European passenger car light-duty diesel sales declined around 20% year over year due to program roll-offs and lower market penetration. GDi revenues declined around 10% due to lower revenues in China.
Additionally, a debt-laden balance sheet is another major concern. As of Jun 30, 2018, long-term debt was $1.49 billion while cash and cash equivalents were $370 million. Such a cash position implies that Delphi Technologies needs to generate adequate amount of operating cash flow to service its debt.
So far this year, shares of Delphi Technologies have declined 20.5% against the 14.3% rise of the industry it belongs to.
Meanwhile, seasonality in business can cause considerable fluctuations in revenues and profits of Delphi Technologies, thereby making forecasting difficult. The company is also likely to suffer from spin-related and public company costs, which is anticipated to be around $70 million for 2018.
Zacks Rank & Stocks to Consider
Currently, Delphi Technologies is a Zacks Rank #3 (Hold) stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
A few better-ranked stocks in the broader Business Services sector include Genpact (G - Free Report) , Automatic Data Processing (ADP - Free Report) and Broadridge (BR - Free Report) . All the stocks carry a Zacks Rank #2 (Buy).
The long-term expected EPS (three to five years) growth rate for Genpact, Automatic Data Processing and Broadridge is 10%, 11.3% and 10%, respectively.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
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