Delphi Technologies (DLPH) Q1 Earnings Beat, Revenues Lag

Delphi Technologies PLC DLPH first-quarter 2019 adjusted earnings per share of 67 cents beat the consensus mark by 12 cents but declined 48.5% on a year-over-year basis on unfavorable product mix, lower volume and unfavorable currency exchange movements, which were partially offset by improvements in operational performance.

So far this year, shares of Delphi Technologies have gained 49.6% compared with 19.5% rise of the industry it belongs to.


Revenues in Detail

Revenues of $1.15 billion missed the consensus estimate by $12 million and decreased 11.2% year over year on a reported basis and 6% on an adjusted basis (adjustments were made for currency exchange).

The top line was hurt by lower sales in China and lower passenger car diesel revenues in Europe. This was, however, partially offset by solid double-digit growth in Power Electronics and Commercial Vehicle Systems, which grew approximately 10% each in the reported quarter.

Segment-wise, Powertrain Systems revenues of $1.02 billion decreased 11.5% year over year on a reported basis and 7% on an adjusted basis. In the reported quarter, lower revenues in passenger car diesel, softness in GDI and ongoing transitions within the company’s customer mix in China partially offset growth in power electronics and commercial vehicle.

Revenues for Delphi Technologies Aftermarket of $193 million declined 11.1% year over year on a reported basis and 6% on an adjusted basis. Segmental revenues were impacted by the timing of certain customer programs, which shifted into the second quarter.

Region-wise, revenue growth was 8% in South America and 3% in Europe. Revenues from AsiaPacificand North Americadeclined 25% and 5%, respectively.

Operating Results

Adjusted operating income of $87 million decreased 45.3% from the prior-year quarter. Adjusted operating income margin decreased 470 basis points from the prior-year quarter to 7.6%.

Segment-wise, adjusted operating income of Powertrain Systems and Delphi Technologies Aftermarket came in at $76 million (down 46.5% y/y) and $11 million (down 35.3% y/y), respectively.

Balance Sheet and Cash Flow

Delphi Technologies exited first-quarter 2019 with cash and cash equivalents of $217 million compared with $359 million at the end of the prior quarter. Long-term debt was $1.48 billion compared with $1.49 billion at the end of the prior quarter.

The company generated $21 million of cash from operating activities in the quarter. Capital expenditures totaled $131 million.

The company repurchased shares worth $15 million in the reported quarter.

2019 Guidance

For 2019, Delphi Technologies reaffirmed its guidance for revenues, adjusted earnings, adjusted operating income margin and cash flow from operations. The company expects revenues in the range of $4.65-$4.75 billion. The current Zacks Consensus Estimate of $4.68 billion lies within the guided range.

Adjusted earnings are expected in the range of $3.00-$3.20 per share. The current Zacks Consensus Estimate of $3.12 lies within the guided range.

Adjusted operating income margin is expected to be around 9%. Cash flow from operations is expected in the range of $320-$350 million. Capital expenditure is projected to be in the range of $310-$330 million. Adjusted effective tax rate is expected to be around 18%.

Zacks Rank & Stocks to Consider

Delphi Technologies currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some better-ranked stocks in the broader Zacks Business Services sector are WEX WEX, Automatic Data Processing ADP and FLEETCOR FLT. While WEX sports a Zacks Rank #1, Automatic Data Processing and FLEETCOR carry a Zacks Rank #2 (Buy).

Long-term expected EPS (three to five years) growth rate for WEX, Automatic Data Processing and FLEETCOR is 15%, 13% and 16.5%, respectively.

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