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Gentex (GNTX) Dips 8% on Q2 Earnings Miss & Tepid Guidance

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Shares of Gentex Corporation (GNTX - Free Report) dipped 8% on Friday after it posted weak second-quarter results, wherein both earnings and revenues missed estimates. Investors were further disappointed as the company lowered 2022 forecasts.

GNTX reported second-quarter 2022 earnings of 31 cents per share, lagging the Zacks Consensus Estimate of 38 cents as well as declining from 36 cents recorded in the year-ago period. Lower-than-expected auto-dimming mirror shipments in both North American and International markets resulted in the underperformance.

The Zeeland-based automotive products supplier reported net sales of $463 million, falling short of the Zacks Consensus Estimate of $472 million but inching up 8% from the year-ago period. The company recorded a gross margin of 32%, lower than the year-ago quarter’s 35.4%, due to increases in raw material costs, freight-related cost, labor cost due to higher wages and labor inefficiencies.

Gentex Corporation Price, Consensus and EPS Surprise

Gentex Corporation Price, Consensus and EPS Surprise

Gentex Corporation price-consensus-eps-surprise-chart | Gentex Corporation Quote

Segmental Performance

The Automotive segment’s net sales — which have the highest contribution to Gentex’s revenues — totaled $452.9 million in the second quarter, higher than $420.6 million reported in the year-ago quarter. The figure marginally missed the Zacks Consensus Estimate of $454 million. In the reported quarter, auto-dimming mirror shipments in the North American market increased 7% to 3,595,000 units but lagged the consensus mark of 3,722,000 units. Shipments edged up 1% year over year in the international markets to 7,097,000 units but lagged the Zacks Consensus Estimate of 7,209,000 units. Total shipments increased 3% to 10,692,000 units, below the consensus mark of 10,931,000 units.

Other net sales, which include dimmable aircraft windows and fire protection products, increased 42% from the year-ago quarter to $10.5 million. Fire protection sales increased 53%. Dimmable aircraft window sales fell 22% from the second quarter of 2021. Gentex expects the dimmable aircraft window sales to continue being impacted until a meaningful recovery of the aerospace industry begins and the Boeing 787 aircraft production levels get a boost.

Financial Tidbits

Total operating expenses rose 21% year over year to $62.6 million in second-quarter 2022. Engineering and R&D expenses increased to $32 million from $27 million. SG&A expenses moved up to $29.7 million from $22.6 million recorded in the corresponding quarter of 2021.

Gentex paid dividends of 12 cents per share in the quarter. During the quarter, the company didn’t resort to any share repurchases. As of Jun 30, it had 22.4 million shares remaining under its current buyback authorization. Gentex had cash and cash equivalents of $269.4 million as of Jun 30, 2022.

Guidance

Per IHS Markit, third-quarter 2022 light vehicle production (LVP) in North America, Europe, China, Japan and Korea is expected to increase 21% year over year to 16.66 million units. Full-year 2022 and 2023 LVP is expected to increase 4% and 8%, respectively, on a yearly basis. 

Gentex, however, remains concerned about high levels of volatility in customer orders and vehicle production volumes. It expects microchip shortage and supply chain disruptions aggravated by the Russia-Ukraine war to play spoilsport. Labor shortages and a weak economic environment are also concerns. Consequently, the company lowered the sales and margins guidance for 2022.

Gentex’s 2022 net sales are now estimated in the band of $1.87-$1.97 billion, compared with the previously guided range of $1.87-$2.02 billion. The gross margin is projected in the range of 33-34%, suggesting a decline from the previous forecast of 35-36%. Capital expenditure is now anticipated in the range of $125-$150 million. Operating expenses are unchanged in the band of $230-$240 million. For 2023, GNTX expects year-over-year sales growth of 15-20%.

Zacks Rank & Other Key Picks

Gentex currently carries a Zacks Rank #2 (Buy).

A couple of other top-ranked players in the auto space include Garrett Motion (GTX - Free Report) and Commercial Vehicle Group (CVGI - Free Report) . Both these stocks sport a Zacks Rank #1 (Strong Buy).

Switzerland-based Garrett designs, manufactures, and sells turbocharger and electric-boosting technologies. The Zacks Consensus Estimate for GTX’s 2022 earnings and sales implies =year-over-year growth of 6.7% and 1.8%, respectively. The consensus mark for 2022 earnings has been revised upward by 5 cents in the past 60 days. Over the trailing four quarters, Garrett surpassed earnings estimates twice for as many misses, the average being 75.4%.

Ohio-based Commercial Vehicle Group supplies interior systems, vision safety solutions and other cab-related products for the global commercial vehicle market, including the heavy-duty (Class 8) truck market, the construction market and other specialized transportation markets. The Zacks Consensus Estimate for CVGI’s 2022 earnings and sales implies year-over-year growth of 6.2% and 2.6%, respectively. The consensus mark for 2022 earnings has been revised upward by 10 cents in the past 30 days.

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


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