Delphi beats quarterly consensus EPS, revenue in-line with expectations

EPS

Delphi Technologies (NYSE: DLPH) beat Wall Street’s consensus expectations of its fourth quarter non-GAAP earnings per share (EPS) of $0.88 by 20 percent according to Seeking Alpha. However, quarterly EPS decreased 14.5 percent year-over-year (Y/Y) from $1.24 to $1.06.

In addition, Delphi missed its EPS guidance target for the full-year of between $4.50 and $4.80, as EPS decreased nearly 15 percent Y/Y, from $5.15 to $4.38.

Delphi Technologies, headquartered in London, is a powertrain (vehicle engine) and aftermarket (auto parts) supplier for automotive manufacturing. It has 21,000 employees and operates in 24 countries.

Revenue and Income

Delphi’s quarterly revenue was in-line with consensus expectations at $1.17 billion, decreasing 9.3 percent Y/Y from $1.29 billion. However, annual revenue for 2018 of $4.86 billion missed Delphi’s guidance of $4.9 billion to $5.1 billion. Full-year revenue increased 0.2 percent from $4.85 billion in 2017.

Adjusted operating income for the quarter decreased nearly 24 percent Y/Y, or $39 million, from $164 million to $125 million. Full-year adjusted operating income decreased 3.7 percent, from $569 million to $548 million. Operating margin for the quarter decreased from 12.7 percent to 10.7 percent. Delphi missed its full-year consensus operating margin expectation of between 12.2 and 12.4 percent, decreasing from 11.9 percent to 11.3 percent.

Delphi’s release said that the company’s earnings decreased because of weaker performance in auto manufacturing in China. Sales of gasoline direct injection engines decreased 10 percent due to lower sales in China. Delphi expects China’s auto production to decrease 8 percent in 2019 while global production will decrease 2 percent.

Business Segments and Regional Performance

Powertrain segment revenue for the quarter decreased 6.1 percent Y/Y, from $1.115 billion to $1.018 billion. Powertrain operating income for the quarter decreased 20 percent Y/Y, from $124 million to $99 million. Operating margin also decreased by 140 basis points from 11.1 percent to 9.7 percent. Power electronic sales grew 30 percent in the fourth quarter and commercial vehicle sales grew 25 percent in the fourth quarter. However, diesel-powered passenger car engine sales decreased by 25 percent in the fourth quarter.

Aftermarket (parts) segment revenue for the quarter decreased 3 percent Y/Y, from $235 million to $225 million. Aftermarket quarterly operating income increased 62.5 percent Y/Y, from $16 million to $26 million. Operating margin also increased by 480 basis points from 6.8 percent to 11.6 percent. The company attributed this increase to a focus on higher margin products.

North American sales accounted for 28 percent of Delphi’s quarterly revenue ($328 million) and increased 6 percent Y/Y. European sales accounted for 44 percent of revenue ($515 million) and increased 3 percent Y/Y. South America accounted for 3 percent of revenue ($35 million) and increased 16 percent Y/Y. China was the only region where sales decreased. China made up 18 percent of revenue ($211 million); sales decreased 24 percent Y/Y.

Lifetime Sales and Cash

Delphi increased lifetime bookings for internal combustion engine and electronics 38 percent Y/Y, or $2.7 billion, from $7.1 billion to $9.8 billion.

Operating cash flow for the quarter decreased nearly 25 percent Y/Y, or $31 million, from $126 million to $95 million. Full-year cash flow increased nearly 8 percent Y/Y, or $30 million, from $389 million to $419 million.

2019 Outlook

Full-year 2019 revenue is expected to decrease between 1 percent and 3 percent to between $4.65 billion and $4.75 billion. Full-year EPS is expected to decrease between 21 percent and 27 percent to between $3.00 and $3.20. Operating cash flow is expected to decrease between 20 percent and 24 percent to between $320 and $350.