Gentex (GNTX) Down 13.7% Since Last Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for Gentex (GNTX). Shares have lost about 13.7% in that time frame, underperforming the S&P 500.

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

Gentex Tops on Q4 Earnings, Down Y/Y

Gentex reported fourth-quarter 2019 earnings per share of 39 cents, surpassing the Zacks Consensus Estimate by a penny. Higher-than-expected automotive net sales lead to the outperformance. Precisely, fourth-quarter automotive net sales totaled $433.8 million, topping the consensus mark of $428 million.

The bottom line, however, declined from the year-ago earnings of 41 cents per share. Its net income was down to $99.5 million from $106.3 million reported in fourth-quarter 2018. This is mainly attributed to year-over-year decline in revenues amid 6-week long strike at General Motors (GM).

During the quarter under review, total revenues came in at $443.8 million, which missed the Zacks Consensus Estimate of $448 million. Moreover, the top line also fell from the year-ago figure of $453.4 million.

Other Highlights

The company recorded gross margin of 36.5% in the quarter under review, down from the year-ago quarter’s 37.9% amid tariff woes and the UAW-General Motors strike.

In the quarter, auto-dimming mirror shipments in the North America market fell 2% to 3.3 million units. In the International market, the same grew 5% from the prior-year quarter to 7.2 million units. Total shipments also rose 3% year over year to 10.5 million units.

Operating expenses increased 3% year over year to $51 million in fourth-quarter 2019. Higher SG&A and R&D costs drove total costs. SG&A expenses rose to $22.1 million from $19.5 million in the year-ago quarter.Engineering and R&D expenses increased to $28.8 million in fourth-quarter 2019 from 26.9 million recorded in the year-ago period.

Share Repurchase & Cash Position

During the quarter under review, the company repurchased approximately 2.4 million shares of its common stock at $28.55 per share. As of Dec 31, 2019, Gentex had around 20.1 million shares remaining for repurchase. The company intends to continue to repurchase additional shares of its common stock to support the capital-allocation strategy.

Gentex had cash and cash equivalents of $296.3 million as of Dec 31, 2019 compared with $217 million in the corresponding period of 2018.

Guidance

Looking forward, the company expects fiscal 2020 revenues in the range of $1.91-$2 billion. Gross margin is forecasted within 36-37% for the current year. Operating expenses are projected in the band of $205-$215 million. Capex is anticipated in the range of $85-$95 million.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month.

VGM Scores

At this time, Gentex has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

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

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, Gentex has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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