A month has gone by since the last earnings report for Sensata (ST Quick QuoteST - Free Report) . Shares have lost about 11.5% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Sensata due for a breakout? Well, first let's take a quick look at its latest earnings report in order to get a better handle on the recent drivers for Sensata Technologies Holding N.V. before we dive into how investors and analysts have reacted as of late.

Sensata Q2 Earnings Beat on Broad Growth and Productivity Gains

Sensata reported second-quarter 2026 adjusted earnings of 98 cents per share, up 12.6% year over year. The figure beat the consensus estimate of 93 cents by 5.4%, supported by higher revenues and productivity gains.

Revenues of $990.60 million increased 5.0% and surpassed the consensus estimate of $969.57 million by 2.2%. Organic growth was 4.4%, with all three segments expanding. On-road truck orders grew at a double-digit pace, reinforcing management’s view of a second-half recovery in North American truck builds.

Operating Margin Advances on Productivity

Adjusted operating income rose 8.0% year over year to $193.30 million. The adjusted operating margin expanded 50 basis points to 19.5%, reflecting stronger volumes and improved productivity. Adjusted gross profit increased 7.4% to $313.80 million, with the corresponding margin rising 70 basis points to 31.7%.

Adjusted selling, general and administrative expenses climbed to $88.50 million from $80.60 million. Adjusted corporate operating expenses increased to $60.90 million from $51.10 million, mainly due to higher variable compensation tied to stronger performance. Research and development expenses declined to $31.90 million from $32.60 million.

Automotive Portfolio Drives Outgrowth

Automotive revenues increased 3.3% year over year to $544.80 million, while organic sales rose 1.8%. Content gains and production mix helped the segment outperform flat global vehicle production. Revenues from both internal-combustion and electric-vehicle applications outgrew production in North America and Europe.

Segment operating income improved to $131.70 million from $121.10 million, lifting margin 120 basis points to 24.2%. India automotive revenues exceeded $20 million in the quarter and grew more than 40%, supported by local customer wins and the company’s localization strategy.

Other Segments Deliver Organic Growth

Aerospace, Defense and Commercial Equipment revenues advanced 11.5% to $233.70 million, including 10.9% organic growth. Operating income rose to $65.10 million from $51.20 million, and margin expanded 340 basis points to 27.8% on strong volume leverage. Revenue growth extended across aerospace, defense, on-road trucks and off-highway equipment.

Industrials revenues grew 2.9% to $212.10 million and increased 4.2% organically, aided by share gains and stabilizing U.S. HVAC production. Operating income slipped to $57.50 million from $57.90 million, while margin contracted 100 basis points to 27.1%. Sensata invested roughly $1.50 million of incremental operating expenses in data center growth initiatives.

Data Center Opportunity Expands

The company secured three additional hyperscaler concept specifications in the quarter, bringing the year-to-date total to five across four major hyperscalers. Sensata was also named a preferred vetted vendor by a major hyperscaler. One specification led to an award for pressure and temperature sensors in coolant distribution units, with shipments expected to begin in the first quarter of 2027.

Management expects the addressable market per megawatt to expand 1.5 to 2.5 times as data centers adopt higher-voltage architectures, liquid cooling and more on-site power generation. Revenue from related industrial components approximately doubled in the first half of 2026 from the prior-year period.

Cash Generation Supports Deleveraging

Net cash from operating activities increased 49.0% to $210.00 million. Free cash flow jumped 61.4% to $186.40 million, and conversion improved to 130% of adjusted net income from 91%. Working-capital initiatives reduced the cash conversion cycle by about 15 days over the past 18 months.

ST used $400 million of cash to retire roughly $406 million of long-term debt. Gross debt ended the quarter at $2.46 billion, while net debt was $2.06 billion. Net leverage declined to 2.4 times trailing 12-month adjusted EBITDA from 3.0 times a year ago. Return on invested capital rose 120 basis points to 11.3%.

Q3 Guidance Points to Growth

For the third quarter of 2026, Sensata expects revenues of $957-$987 million, representing growth of 3-6% from $932 million a year earlier. Adjusted operating income is projected at $186-$193 million, with an adjusted operating margin of 19.4-19.6%.

Adjusted earnings are forecast at 93-97 cents per share, up 4-9% from 89 cents. The outlook includes about $10 million each of tariff costs and customer pass-through revenues, leaving adjusted operating income, net income and earnings unaffected. Seasonal European automotive shutdowns are expected to weigh on sequential revenues.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month.

VGM Scores

Currently, Sensata has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. However, the stock has a score of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. Interestingly, Sensata has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Sensata belongs to the Zacks Instruments - Control industry. Another stock from the same industry, Badger Meter (BMI Quick QuoteBMI - Free Report) , has gained 6% over the past month. More than a month has passed since the company reported results for the quarter ended June 2026.

Badger Meter reported revenues of $222.32 million in the last reported quarter, representing a year-over-year change of -6.6%. EPS of $1.02 for the same period compares with $1.17 a year ago.

Badger Meter is expected to post earnings of $1.21 per share for the current quarter, representing a year-over-year change of +1.7%. Over the last 30 days, the Zacks Consensus Estimate has changed +1.2%.

Badger Meter has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of D.