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Delphi Technologies (DLPH) Down 17.8% Since Last Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for Delphi Technologies (DLPH - Free Report) . Shares have lost about 17.8% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Delphi Technologies due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts. <p style="text-align: justify;"><u><strong>Delphi Technologies Beats on Q2 Earnings, Tweaks View </strong></u></p><p style="text-align: justify;"><strong>Delphi Technologies </strong>reported mixed second-quarter 2018 results, wherein earnings surpassed the Zacks Consensus Estimate but revenues missed the same.</p><p style="text-align: justify;">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 due to interest expense related to the issuance of debt in 2017 and spin-related costs associated with becoming a standalone public company.</p><p style="text-align: justify;"><strong>Revenues in Detail</strong></p><p style="text-align: justify;">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 (adjustments were made for currency exchange and certain aftermarket original equipment service revenue retained by the former parent).</p><p style="text-align: justify;">Segment-wise, <strong>Powertrain Systems</strong> revenues of $1.09 billion increased 4.9% year over year on a reported basis and was consistent on an adjusted basis. In the quarter, strong growth in commercial vehicle and power electronics was offset by weakness in light-duty diesel and decline in GDi.</p><p style="text-align: justify;">Revenues for <strong>Delphi Technologies Aftermarket</strong> declined 7.3% year over yearon a reported basis and 1% on an adjusted basis to $215 million. Lower sales through the OES channel more than offset higher sales to independent Aftermarket customers.</p><p style="text-align: justify;">Region-wise, revenue growth was 6% in South America, 4% in North America and 2% in Europe. However, revenues from Asia declined 4%.</p><p style="text-align: justify;"><strong>Operating Results</strong></p><p style="text-align: justify;">Adjusted operating income of $156 million decreased 4.9% from the prior-year quarter due to spin-related and public company costs. Adjusted operating income margin declined 110 basis points (bps) year over year to 12.7%.</p><p style="text-align: justify;"><strong>Balance Sheet and Cash Flow</strong></p><p style="text-align: justify;">Delphi Technologies exited the second quarter with cash and cash equivalents of $370 million compared with $316 million at the end of the prior quarter. Long-term debt was $1.49 billion compared with $1.51 billion at the end of the prior quarter.</p><p style="text-align: justify;">The company generated $164 million&nbsp;of net cash from operating activities in the quarter. Capital expenditures totaled $57 million.</p><p style="text-align: justify;">Apart from a quarterly dividend payment of $15 million, the company&rsquo;s board of directors also approved a $100 million repurchase authorization concurrent with the earnings release on Aug 8. Notably, this is the first share repurchase program approved by Delphi Technologies.</p><p style="text-align: justify;"><strong>2018 Guidance</strong></p><p style="text-align: justify;">For 2018, Delphi Technologies tightened its revenue and earnings guidance. The company now expects revenues in the range of $5.00-$5.10 billion compared with the previously guided range of $5.00-$5.20 billion. Adjusted earnings are expected in the range of $4.65-$4.85 per share compared with the previously guided range of $4.65-$4.95.</p><p style="text-align: justify;">Adjusted operating income margin is expected in the range of 12.1%-12.3%, down 20 bps from the previously guided range of 12.3% - 12.5%. Capital expenditure is projected to be in the range of $290-$310 million compared with the previously guided range of $280-$300 million.</p><p style="text-align: justify;">Operating cash flow expectations remain unchanged in the range of $440-480 million. Adjusted effective tax rate is expected between 16-17%, as expected earlier.</p>

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -8.15% due to these changes.

VGM Scores

Currently, Delphi Technologies has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. However, the stock was allocated a grade of A on the value side, putting it in the top 20% 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 broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Delphi Technologies has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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