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Gentex (GNTX) Earnings Miss Estimates in Q4, Shares Down

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Shares of Gentex Corporation (GNTX - Free Report) have plunged roughly 3.4% in a day’s trading, following the fourth-quarter 2018 earnings release. In the reported quarter, the company’s earnings per share were 41 cents, which missed the Zacks Consensus Estimate of 43 cents. In the year-ago quarter, the company’s bottom-line figure was 46 cents. Gentex’s net income declined to $106.3 million compared with $130.5 million in fourth-quarter 2017.

During the quarter under review, the company reported net sales of $453.4 million, missing the Zacks Consensus Estimate of $484 million. Moreover, the top line declined 1% from net sales of $459.6 million recorded in the fourth quarter of 2017. The year-over-year decline was due to plant shutdowns and production changes at OEM’s as well as certain Tier 1 customers.

In fourth-quarter 2018, the combined unit production in Europe, North America, Japan, China and Korea declined roughly 6% compared with IHS Markit’s forecast of a positive 2%. The total negative impact due to the shortfall in vehicle production lowered Gentex’s revenues by approximately $30 million in the last quarter of 2018.

Gentex Corporation Price, Consensus and EPS Surprise

 

2018 Results

In 2018, Gentex reported net income of $437.9 million or $1.62 per share, up from $406.8 million or $1.41 per share in the previous year.

Net sales for the year went up 2% year over year to $1.83 billion.

Quarter in Details

During the reported quarter, the company recorded gross margin of 37.9%, down from the year-ago quarter figure of 39.2%. The gross margin was adversely impacted by approximately 80 basis points due to effects of tariffs.

During the quarter under review, auto-dimming mirror shipments in the North American market rose by 11% to 3.3 million and in the International market it declined 2% to 6.9 million. In total, it rose by 2% year over year to 10.2 million.

Operating expenses during fourth-quarter 2018 were up 0.5% to $46.5 million in comparison with $46.3 million in fourth-quarter 2017.

Share Repurchase

During fourth-quarter 2018, the company repurchased 3.3 million of common shares at an average price of $21 per share. For the year ended Dec 31, 2018, the company repurchased 26.4 million shares at $22.37 per share. Gentex had around 8.8 million shares remaining for repurchase.

Financials

Gentex had cash and cash equivalents of $217 million as of Dec 31, 2018, compared with $569.7 million as of Dec 31, 2017. Further, the company had no long-term debt as of  Dec 31, 2018..

Looking Forward

For 2019, Gentex expects revenues of $1.83-$1.93 billion and operating expenses of $195-$200 million. Further, gross margin is anticipated to be 36-37% in the current year.

Zacks Rank & Stocks to Consider

Gentex currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader auto sector are AB Volvo (VLVLY - Free Report) , Cooper Tire & Rubber Company , and Honda Motor Co., Ltd. (HMC - Free Report) . Volvo and Cooper Tire currently carry a Zacks Rank #2 (Buy) while Honda sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Volvo has an expected long-term growth rate of 15%. Share price of the company has increased 8.6% in the past month.

Cooper Tire has an expected long-term growth rate of 4%. Over the past month, shares of the company have gained 6.3%.

Honda has an expected long-term growth rate of 2.9%. Shares of the company have gained 13.5% in the past month.

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