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UBS Upgrades Delphi Automotive to a ‘Buy’

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Price movement of Delphi Automotive

Delphi Automotive (DLPH) has a market cap of $19.6 billion. DLPH rose by 1.3% to close at $70.98 per share as of March 15, 2016. The price movement on a weekly, monthly, and year-to-date (or YTD) basis is 3.0%, 15.9%, and -16.8%, respectively.

Currently, DLPH is trading 5.1% above its 20-day moving average, 5.1% above its 50-day averages, and 8.3% below its 200-day moving average.

The First Trust US IPO ETF (FPX) invests 2.1% of its holdings in Delphi Automotive. The ETF tracks a market-cap-weighted index of the 100 largest US IPOs over the first 1,000 trading days of each stock. Stocks must pass additional quantitative screens to make it into the index. The YTD price movement of FPX was -3.9% as of March 14, 2016.

The market caps of Delphi Automotive’s competitors are as follows:

  • Autoliv (ALV) — $10.1 billion
  • Lear Corporation (LEA) — $8.2 billion
  • Visteon Corporation (VC) — $3.0 billion

UBS upgraded Delphi Automotive

UBS has upgraded Delphi Automotive’s rating to “buy” from “neutral.” It set the company’s price target at $88.00 per share.

Performance of Delphi Automotive in 4Q15 and 2015

Delphi Automotive reported fiscal 4Q15 net sales of $3,879.0 million, a rise of 2.7% compared to net sales of $3,778.0 million in fiscal 4Q14. Sales of the Electrical/Electronic Architecture and Electronics and Safety segments rose by 5.6% and 2.9%, respectively. Sales of the Powertrain Systems segment fell by 3.3% in fiscal 4Q15 compared to fiscal 4Q14.

The company’s cost of sales as a percentage of net sales rose by 1.3%, and its operating income fell by 27.8% in fiscal 4Q15 compared to fiscal 4Q14. Its net income and EPS (earnings per share) fell to $192.0 million and $0.68, respectively, in fiscal 4Q15, compared to $344.0 million and $1.16, respectively, in fiscal 4Q14.

Fiscal 2015 results

In fiscal 2015, Delphi Automotive (DLPH) reported net sales of $15,165.0 million, a fall of 2.2% YoY (year-over-year). Its net income and EPS rose to $1,450.0 million and $5.06, respectively, in fiscal 2015, compared to $1,351.0 million and $4.48, respectively, in fiscal 2014.

Meanwhile, its cash and cash equivalents fell by 37.7%, and inventories rose by 16.6% in fiscal 2015. Its current ratio fell to 1.30x, and debt-to-equity ratio rose to 3.4x, in fiscal 2015, compared to a current ratio and a debt-to-equity ratio 1.34x and 2.6x, respectively, in fiscal 2014.

The price-to-earnings and price-to-book value ratios of Delphi Automotive were 17.1x and 8.7x, respectively, as of March 15, 2016.

Projections

Delphi Automotive has made the following projections for fiscal 1Q16 and fiscal 2016:

Fiscal 1Q16

  • revenues in the range of $4.0 billion–$4.1 billion
  • adjusted operating margin in the range of 12.3%–12.7%
  • adjusted EPS in the range of $1.28–$1.38
  • adjusted effective tax rate of 17%

Fiscal 2016

  • revenues in the range of $16.6 billion–$17.0 billion
  • adjusted operating margin in the range of 13.3%–13.6%
  • adjusted EPS in the range of $5.80–$6.10
  • cash flow operations of $2.0 billion
  • capital expenditure of $800 million
  • adjusted effective tax rate of 17%

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