Delphi Automotive (DLPH) Q3 Earnings Beat, View Revised

Delphi Automotive PLC DLPH posted a 17% increase in adjusted earnings to $1.50 per share in the third quarter of 2016 from $1.28 earned in the prior-year quarter. Moreover, earnings per share surpassed the Zacks Consensus Estimate of $1.42.

Adjusted net income increased to $409 million from $365 million a year ago. Including special items, Delphi Automotive reported net income of $293 million or $1.07 per share in third-quarter 2016, down from $351 million or $1.23 per share a year ago.

Revenues rose 13% year over year to $4.1 billion and surpassed the Zacks Consensus Estimate of $3.97 billion. The year-over-year increase was supported by the acquisition of HellermannTyton Group PLC and volume growth in North America, Europe and the Asia Pacific.

Excluding the impact of currency exchange, commodity movements, acquisitions and divestitures, revenues increased 10% year over year. The upside was led by performance improvement of 19% in Asia, 9% in North America and 7% in Europe, partially countered by a 13% decline in South America.

Adjusted operating income rose to $531 million from $470 million in the third quarter of 2015. Adjusted operating margin increased to 13.0% from 12.9% in the year-ago quarter. The rise in margins can be attributed to strong performance in the Asia Pacific, Europe and North America, an increase in earnings from the acquisition of HellermannTyton, and successful cost-reduction initiatives.

Segment Details

In the Electrical/Electronic Architecture segment, revenues improved 18% to $2.29 billion in the reported quarter. Adjusted operating income surged 20% to $316 million.

In the Powertrain Systems segment, revenues inched up 1% to $1.08 billion. Adjusted operating income rose 4% to $120 million.

The Electronics and Safety segment’s revenues increased 14% to $763 million. Adjusted operating income improved 3% to $95 million.

Share Repurchases

In the first nine months of 2016, Delphi Automotive repurchased 7.98 million shares for approximately $535 million. Following this, the company had $1.47 billion available for repurchases under its current share buyback program.

Financial Position

Delphi Automotive had cash and cash equivalents of $395 million as of Sep 30, 2016, compared with $535 million as of Dec 31, 2015. Total debt amounted to $4.07 billion as of Sep 30, 2016, compared with $4.01 billion as of Dec 31, 2015.

In first-nine months 2016, operating cash flow increased to $1.3 billion from $1 billion in the first nine months of 2015. Capital expenditure totaled $614 million compared with $539 million a year ago.

Outlook

For 2016, Delphi Automotive raised its revenue guidance to $16.4–$16.5 billion from the prior range of $16.25–$16.45 billion. Adjusted earnings per share are expected in the range of $6.00–$6.10, compared to the prior range of $5.95–$6.05.

Adjusted operating income is anticipated in the range of $2.16–$2.19 billion (13.2%–13.3% of sales) in 2016, compared to the prior guidance of $2.15–$2.2 billion (13.2%–13.4% of sales). Meanwhile, capital expenditure is projected to be around $800 million and operating cash flow is expected to be about $1.9 billion.

Zacks Rank

Delphi Automotive currently carries a Zacks Rank #4 (Sell). Some better-ranked auto stocks include Spartan Motors Inc. SPAR, Gentex Corp. GNTX and Magna International Inc. MGA.

Magna International managed to beat earnings in the last four quarters, delivering a positive average surprise of 4.18%. The company holds a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Spartan Motors, carrying a Zacks Rank #2, has a long-term expected growth rate of 15%, compared to the industry average of 12%.

Gentex, also a Zacks Rank #2 stock, has a long-term expected growth rate of 11.20%.

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