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Gentex (GNTX) Up 12.1% Since Last Earnings Report: Can It Continue?

Zacks Equity Research

A month has gone by since the last earnings report for Gentex (GNTX). Shares have added about 12.1% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Gentex due for a pullback? 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.

Gentex Q2 Earnings Beat Estimates, Revenues Rise Y/Y

Gentex’s delivered second-quarter 2019 earnings per share of 42 cents, which beat the Zacks Consensus Estimate of 40 cents. In the year-ago quarter, the company’s bottom-line figure amounted to 40 cents. Its net income declined to $108.9 million from $109 million in second-quarter 2018.

During the quarter under review, the company delivered net sales of $468.7 million, which beat the Zacks Consensus Estimate of $464 million. Moreover, the top line moved up 3% from the year-ago quarter’s figure of $454.9 million.

Quarter in Detail

During the reported quarter, the company recorded gross margin of 37.7%, up from the previous quarter’s tally of 36.2%. The gross margin was affected by approximately 60 basis points due to impact of tariffs.

During the quarter, auto-dimming mirror shipments in the North American market rose 12% to 3.5 million. In the International market, the same declined 2% to 7.2 million. In total, shipments rose 2% year over year to 10.8 million.

Operating expenses during second-quarter 2019 increased 5% to $48.6 million from $46.1 million in second-quarter 2018.

Share Repurchase

During the quarter under review, the company repurchased approximately 3.1 million shares of its common stock at an average price of $22.72. As of Jun 30, 2019, Gentex had around 26 million shares remaining for repurchase. The company intends to continue to repurchase additional shares of its common stock to support its capital allocation strategy.

Financials

Gentex had cash and cash equivalents of $260.3 million as of Jun 30, 2019 compared with $217 million as of Dec 31, 2018.

Looking Forward

The company reiterated its guidance for 2019. It expects revenues in the range of $1.87-$1.90 billion. Gross margin is anticipated in the band of 36.5-37.5% for the current year. Projections for operating expenses remain at $195-$200 million.
 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

At this time, Gentex has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. 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 these revisions looks promising. It comes with little surprise Gentex has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.



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