Technology

Standard Motor Products (SMP) Down 0.2% Since Last Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for Standard Motor Products (SMP). Shares have lost about 0.2% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Standard Motor Products due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Standard Motor Q2 Earnings & Sales Decline Y/Y

Standard Motor reported adjusted earnings of 52 cents per share in second-quarter 2020, beating the Zacks Consensus Estimate of 22 cents. However, the bottom line came in lower than the prior-year quarter’s 92 cents per share. Dismal performance of both its major segments — Engine Management and Temperature Control — resulted in this year-over-year decline.

Second-quarter earnings from continuing operations were $11.8 million compared with the $21 million recorded in the prior-year quarter. Total revenues decreased to $248 million, beating the Zacks Consensus Estimate of $227 million. The revenue figure, however, came in lower than the year-ago number of $305 million.

Gross profit decreased to $64.3 million from the year-ago quarter’s $88.9 million. Operating income slid to $16 million from the $27.7 million recorded in the prior-year quarter.

Segmental Results

During the June-end quarter, revenues from the Engine Management segment fell 20.6% year on year to $173.1 million. Operating income was $16.7 million compared with the prior-year quarter’s $26.3 million.

Revenues in the Temperature Control segment decreased 14.2% year over year to $72.4 million. The segment registered an operating income of $3.97 million compared with the $7.15 million recorded in second-quarter 2019.

Revenues in the All Other segment decreased to $2.39 million from the $2.72 million recorded in the prior-year quarter. The segment reported an operating loss of $4.67 million, wider than the loss of $5.13 million posted in corresponding quarter of 2019.

Financial Position 

Standard Motor had cash and cash equivalents of $22.5 million as of Jun 30, 2020, compared with $10.4 million as of Dec 31, 2019. Long-term debt was $108,000 compared with $129,000 recorded as of Dec 31, 2019. Capex during the quarter amounted to $9.03 million, up from the $7.58 million recorded in the first six months of 2020.

In a bid to boost financial flexibility amid the pandemic-related uncertainties, Standard Motor has suspended its quarterly payouts and stock-buyback programs.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 36.23% due to these changes.

VGM Scores

At this time, Standard Motor Products has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. It comes with little surprise Standard Motor Products has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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