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Bear of the Day: Delphi Technologies (DLPH)

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Delphi Technologies (DLPH - Free Report) develops, designs and manufactures powertrain technologies for original equipment manufacturers. The company's operating segment consists of Powertrain Systems and Products & Service Solutions; it supplies a full suite of aftermarket products, including engine control modules, pumps, injectors, fuel modules, exhaust gas recirculation valves, brakes, steering and suspension.

Q2 Earnings Weaker-Than-Expected

Earnings of 58 cents per share lagged behind our consensus estimate, while revenues of $1.2 billion also came just short of analyst expectations; revenues fell 9% year-over-year.

Adjusted revenue reflects a decrease of 7% in Powertrain Systems and an increase of 3% in Aftermarket.

Delphi also noted that its North America and Asia markets were down 10%, but were partially offset by growth of 3% in South America and consistent revenue in Europe.

Estimates Keep Falling

Delphi Technologies PLC Price and Consensus

 

Analysts have since turned bearish on Delphi Technologies, with seven cutting estimates in the last 60 days for the current fiscal year. Earnings are expected to decline about 34% for the year, and the Zacks Consensus Estimate has dropped 28 cents during that same time period from $3.17 to $2.89 per share.

This sentiment has stretched into 2020. While earnings could see positive growth, our consensus estimate has dropped 37 cents in the past two months.

DLPH is now a Zacks Rank #5 (Strong Sell).

Shares of the automotive supplier have gained only 9% since January compared to the S&P 500’s gain of about 15%.

Bottom Line

Like other auto suppliers, Delphi have been under pressure after President Trump announced plans to impose additional 10% tariffs on $300 billion worth of Chinese goods last week.

It’s also been struggling a bit since the 2017 split with its self-driving business; since then, its lost 70% of its value.

CEO Richard Dauch has been focusing on streamlining Delphi’s operations and improving the company’s profitability, but macroeconomic headwinds are putting pressure on shares and Delphi’s growth prospects.

Investors who are interested in adding a broader technology services peer to their portfolio should take a look at Zacks Rank #2 (Buy) ranked Loop Industries (LOOP - Free Report) or Zacks Rank #3 (Hold) ranked Aptiv (APTV - Free Report) .

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