AQR Capital’s holdings in Delphi Automotive
AQR Capital commenced a position in Delphi Automotive (DLPH) by purchasing 2,105,780 shares of the company, which represented 0.32% of the fund’s 4Q14 portfolio.
Overview of Delphi Automotive
Delphi Automotive manufactures vehicle components. The company also offers safety, thermal, power train, electronic, and electrical technology solutions for the commercial vehicle and automotive markets globally.
DLPH operates via four segments:
- Electrical and Electronic Architecture
- Power Train Systems
- Electronics and Safety
- Thermal Systems
The Electrical and Electronic Architecture segment offers comprehensive design for the electrical architecture of vehicles, including electrical centers, wiring assemblies, and connectors.
The Power Train Systems segment provides system integration of complete engine management systems, including electronic controls, fuel combustion, injection, and handling.
The Electronics and Safety segment offers critical components, advanced software, and systems for the safety and infotainment of passengers.
The Thermal Systems segment caters to the automotive markets. The segment provides heating, ventilation, and air conditioning systems along with power train cooling systems such as heat exchangers and compressors.
DLPH is part of the iShares S&P 500 Value ETF (IVE). The company has an exposure of 0.23% in the fund.
Segment results for 4Q14
In the fourth quarter, there was a healthy expansion of margins across all DLPH segments, barring the E&S segment. DLPH’s lean cost structure enables it to invest in engineering to promote sustained growth.
Delivering value to shareholders
Delphi reported adjusted operating income of $520 million for 4Q14. This was a 10% rise from the prior-year period. Adjusted earnings per share (or EPS) totaled $1.32, up from $1.12 in 4Q13.
In 2014, Delphi returned $1.3 billion to shareholders in the form of share repurchases and dividends.
Sale of Thermal business
In a restructuring move, Delphi recently agreed to sell its Thermal business to Germany’s MAHLE GmbH. The proceeds from this transaction, which will likely close in 3Q15, should go towards funding stock repurchases, acquisitions, and other growth initiatives.
Fuel economy, safety, and connectivity
Fuel economy, safety features, and connectivity are important drivers of sales in the automotive industry. Delphi has been offering innovative solutions such as the Gasoline Direct Injection for better fuel economy, the RACam (radar and camera system) with enhanced safety features such as collision warning, and the MyFi range of connected solutions that provide infotainment systems.
Delphi Automotive tops the list of its peers in terms of being recognized for innovation, with 56 PACE (or Premier Automotive Suppliers’ Contribution to Excellence) awards and finalist recognitions compared to 23 for BorgWarner (BBG) and 21 for PPG Industries (PPG).
In the next part of this series, we will discuss AQR Capital’s increased position in Flextronics International (FLEX).