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Aptiv (APTV) Rides on Liquidity Despite Escalating Costs

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Aptiv PLC (APTV - Free Report) is currently benefiting from lucrative connected cars market and sound liquidity position. However, escalation in cost is worrisome.

Aptiv reported better-than-expected third-quarter 2022 results. Adjusted earnings of $1.28 per share beat the Zacks Consensus Estimate by 23.1% and increased more than 100% on a year-over-year basis. Revenues of $4.6 billion surpassed the Zacks Consensus Estimate by 7.7% and increased 26.3% year over year.

How Is Aptiv Faring?

Aptiv is exposed to the lucrative connected cars market. With safety becoming a key selling point for connected cars, automakers are increasingly seeking related technologies. This is one of the reasons behind the quick advancement of the driver-assistance system market.

Demand for personalization, infotainment connectivity and convenience is also increasing rapidly. Furthermore, added features require more wiring inside vehicles. We believe that with excellent system integration expertise, Aptiv is well positioned to leverage on growing electrification, connectivity and autonomy trends in the automotive sector.

Aptiv has a sound liquidity position. Its current ratio (a measure of liquidity) was at 2.66 at the end of third-quarter 2022, higher than 2.63 recorded at the end of the second-quarter and the prior-year quarter's recorded figure of 2.11. A current ratio greater than 1.5 is usually considered good for a company. This may imply that the risk of default is less.

Cost Woes Continue

Aptiv is witnessing escalation in costs as it continues to invest in organic as well as inorganic growth and remains embroiled in legal matters. Investments in products like autonomous driving software are expected to make meaningful contributions to the company’s growth after 2022, indicating that acceptance and integration of technology will take longer time.

Zacks Rank and Stocks to Consider

Aptiv currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some better-ranked stocks in the broader Zacks Business Services sector are Automatic Data Processing, Inc. (ADP - Free Report) and Booz Allen Hamilton Holding Corporation (BAH - Free Report) .

Automatic Data Processing carries a Zacks Rank #2 (Buy) at present. ADP has a long-term earnings growth expectation of 12%.

ADP delivered a trailing four-quarter earnings surprise of 3.5%, on average.

Booz Allen is currently Zacks #2 Ranked. BAH has a long-term earnings growth expectation of 8.9%.

BAH delivered a trailing four-quarter earnings surprise of 8.8%, on average.
 


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