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Gentex (GTNX) Lags Q1 Earnings Estimates, Trims '20 View

Zacks Equity Research

Gentex Corporation GNTX reported first-quarter 2020 earnings per share of 36 cents, missing the Zacks Consensus Estimate by a penny. Weaker-than-expected automotive net sales resulted in the underperformance. Precisely, first-quarter automotive net sales totaled $439.9 million, lagging the consensus mark of $463 million.

The bottom line also declined from the year-ago earnings of 40 cents per share.Coronavirus-induced shutdowns in various parts of Asia, Europe and North America dented revenues and earnings of the automatic-dimming rearview-mirror specialist in first-quarter 2020.

During the quarter under review, total revenues came in at $453.7 million, which missed the Zacks Consensus Estimate of $467 million. Moreover, the top line fell from the year-ago figure of $468.6 million.

Gentex Corporation Price, Consensus and EPS Surprise

 

Gentex Corporation Price, Consensus and EPS Surprise
Gentex Corporation Price, Consensus and EPS Surprise

Gentex Corporation price-consensus-eps-surprise-chart | Gentex Corporation Quote

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Key Takeaways

The company recorded gross margin of 34.5% in the quarter under review, down from the year-ago quarter’s 36.2% due to lost revenues amid coronavirus and annual customer price reductions.

In the quarter, auto-dimming mirror shipments in the North America market dropped 6% from the prior-year quarter to 3.2 million units. In the International market, the same fell 1% from the prior-year quarter to 7.1 million units. Total shipments also declined 3% year over year to 10.4 million units, as global light vehicle production dwindled 24% in the first quarter of 2020.

Operating expenses increased 7% year over year to $51.6 million in first-quarter 2020. Product launches and higher R&D costs drove total expenses. SG&A expenses rose to $21.9 million from $19.9 million in the year-ago quarter. Engineering and R&D expenses increased to $29.6 million in first-quarter 2020 from $28.1 million recorded in the year-ago period.

Buyback & Dividend

During the quarter under review, the company repurchased approximately 7 million shares of its common stock at $25.48 per share. As of Mar 31, 2020, Gentex had around 13 million shares remaining under the buyback program. During the quarter, it announced a 4% payout hike, representing the 10th consecutive year of dividend increase. While most of the companies are suspending dividends and share buybacks to conserve cash amid the pandemic-led financial crisis, Gentex remains committed to preserve shareholder values. Notably, the company had cash and cash equivalents of $278.5 million as of Mar 31, 2020.

2020 Guidance Trimmed

Things are worsening for the auto sector amid the COVID-19 pandemic, as is evident from factory closures and depressed demand for vehicles amid weak consumer confidence. IHS Markit expects total light vehicle production to decline 20% year over year in 2020. Given the dreary scenario, Gentex has downwardly revised its guidance for 2020. The company now envisions net sales in the band of $1.58-$1.67 billion, down from its previous guidance range of $1.91-$2 billion. Gross margin is anticipated in the range of 34-35% compared with the prior guided range of 36-37%. Capex and operating expenses are estimated within $60-$70 million and $195-$205 million, respectively. Amid coronavirus-led uncertainty, Gentex is withdrawing revenue forecast for 2021.

Zacks Rank & Key Picks

Gentex currently carries a Zacks Rank #3 (Hold). Some better-ranked players in the auto sector include Modine Manufacturing Company MOD, Spartan Motors, Inc. SPAR and Unique Fabricating, Inc. UFAB, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Gentex Corporation (GNTX) : Free Stock Analysis Report
 
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Unique Fabricating, Inc. (UFAB) : Free Stock Analysis Report
 
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