Aptiv Surges 7.5% after Strong Q2 Release

Aptiv (APTV) stock soared 7.6% yesterday after the auto tech company reported its Q2 earnings before markets opened. The company beat analysts’ earnings estimate but missed their revenue estimate by 0.38%. Aptiv stock closed 7.6% higher yesterday, while the broader-market S&P 500 closed 0.47% lower. The Fed rate cut announced yesterday took a toll on markets.

Aptiv’s second-quarter results

The company’s sales were down in the second quarter. Its revenue fell 1.5% YoY (year-over-year) to $3.62 billion, missing analysts’ estimate of $3.68 billion.

Although Aptiv’s EPS of $1.30 beat analysts’ estimate of $1.10, they fell 5.0% YoY. The company’s operating margin narrowed YoY to 11.2% from 12.9% due to foreign currency translation, vehicle production declines in China, and continued growth investments. In the quarter, the company paid $177 million in cash dividends and share repurchases to shareholders. Aptiv’s Signal and Power Solutions revenue fell 2.0% YoY to $2.5 billion, and its Advanced Safety and User Experience revenue rose 1.0% YoY to $1.05 billion.

Aptiv Surges 7.5% after Strong Q2 Release

Aptiv’s guidance

In the third quarter, Aptiv expects adjusted EPS $1.27–$1.33, net sales of $3.60 billion–$3.70 billion, and an operating income margin of 11.5%–11.8%. In fiscal 2019, the company expects EPS of $5.05–$5.15, net sales of $14.5 billion–$14.7 billion, and an adjusted operating income margin of 11.4%–11.5%. During its earnings call, Aptiv stated that because it foresees weakness in China affecting global vehicle production, it now expects production to decline by 4% instead of 3.5%.

Price coverage for Aptiv

After Aptiv’s release, JPMorgan Chase raised its target price for Aptiv stock to $97 from $93, Credit Suisse raised it to $96 from $90, and Citigroup raised it to $102 from $90. Of the 26 analysts covering Aptiv stock, 13 recommend “buy,” six recommend “strong buy,” six recommend “hold,” and one recommends “sell.” Their average 12-month target price of $91.20 implies a 4% upside from its current price. The stock has fallen 42.3% YTD (year-to-date).

CEO’s views on earnings results

With the earnings release, Aptiv president and CEO Kevin Clark said, “Aptiv’s second quarter performance, including sustained strong above-market growth despite weak global vehicle production, reflects the efforts we have taken to build a more sustainable business, perfectly positioned to efficiently solve our customer’s toughest challenges.”

Peer and ETF performance

Aptiv peer Adient (ADNT) is set to release its third-quarter results on August 6. The stock closed 2.9% higher yesterday and has gained 57.7% YTD. Analysts expect its revenue to fall 8.3% in the quarter, and its EPS to fall YoY to $0.34 from $1.45.

Veoneer (VNE) stock, which fell 1.2% yesterday, has declined 23.0% YTD. The company released its second-quarter results last week, beating analysts’ revenue estimate. However, it reported a loss of $1.39 per share. The Vanguard Total Stock Market ETF (VTI), which invests in Aptiv, closed with a loss of 1.0% yesterday. It has gained 19.2% YTD.

Market performance

Markets plunged yesterday after the Fed announced a rate cut. Although markets were hoping for a rate cut, they also expected the Fed to announce this was the beginning of a longer cycle. It didn’t, prompting the decline.

Yesterday, the SPDR Dow Jones Industrial Average ETF (DIA) fell 1.2%. DIA returned 1.0% in July. The Invesco QQQ Trust (QQQ), which tracks the Nasdaq Composite, fell 1.09% yesterday. It gained 1.3% in July. Finally, the SPDR S&P 500 ETF (SPY), which closed with a loss of 1.09% yesterday, returned 1.5% in July.