Company Reports

Sensata Technologies' reported good second-quarter results above its guidance ranges. Sales rose 5% year over year to $991 million, and non-GAAP operating margin expanded 50 basis points year over year to 19.5%. Third-quarter guidance implies similar levels to the second quarter.

Sensata Technologies' first-quarter results hit the top end of guidance, with sales rising 3% year over year to $935 million. Guidance implies continued growth, with a midpoint of $965 million indicating 2% year-over-year growth and 3% sequential growth.

We view Sensata Technologies as a niche, but capable supplier of sensors and electrical protection in the transportation and industrial markets. We like the firm’s ability to benefit from electrification across industries with a good organic portfolio. Nevertheless, Sensata has been plagued by poor execution, including value-dilutive acquisitions, over the past five years. After a misguided strategic foray into the telematics market, Sensata changed CEOs and divested its failed Insights business. We like our first evidence into the new management team, installed in 2025, which shows early credibility and execution.

We've lowered our economic moat rating for Sensata Technologies to no-moat from narrow, following a review of the business and its peers.

Sensata Technologies' fourth-quarter results hit the top end of guidance, and management provided a solid outlook for 2026. Revenue returned to year-over-year growth in the fourth quarter, rising 1% to $918 million. First-quarter guidance implies sequential sales growth of about 1%.

We view Sensata Technologies as a differentiated supplier of sensors and electrical protection, predominantly for transportation markets. The firm has oriented itself to benefit from secular trends toward electrification, efficiency, and connectivity. Despite the cyclical nature of the automotive and heavy vehicle markets, electric vehicles and stricter emissions regulations provide Sensata the opportunity to sell into new sockets, which has allowed the firm to outpace underlying vehicle production growth by about 4% historically. We think such outperformance is achievable going forward, given our expectations for a fleet mix shift toward EVs and Sensata’s growing addressable content in higher-voltage vehicles.

We view Sensata Technologies as a differentiated supplier of sensors and electrical protection, predominantly for transportation markets. The firm has oriented itself to benefit from secular trends toward electrification, efficiency, and connectivity. Despite the cyclical nature of the automotive and heavy vehicle markets, electric vehicles and stricter emissions regulations provide Sensata the opportunity to sell into new sockets, which has allowed the firm to outpace underlying vehicle production growth by about 4% historically. We think such outperformance is achievable over the next 10 years, given our expectations for a fleet mix shift toward EVs and Sensata’s growing addressable content in higher-voltage vehicles.

Sensata Technologies' third-quarter results came in above management's guidance. Sales dipped 5% year over year to $932 million, but non-GAAP operating margin rose 10 basis points year over year to 19.3%. Guidance implies another sequential sales decline, but further margin expansion.

Sensata's second-quarter results beat guidance on the top and bottom lines. Revenue rose 4% sequentially (down 9% year over year) to $943 million. Guidance implies a sequential step down for revenue, which management attributed to weakening demand in the heavy vehicle market.

Sensata Technologies' first-quarter results beat management guidance, with revenue of $911 million roughly flat sequentially and down 9% year over year. Second-quarter revenue guidance implies about 2% sequential growth, including $20 million in management-estimated counter-tariff pricing increases.

Sensata Technologies' fourth-quarter revenue declined 9% year over year and 8% sequentially to $908 million, just above the top end of management's guidance. March-quarter guidance implies a 3% sequential revenue decline and 100 basis points of margin compression.

We view Sensata Technologies as a differentiated supplier of sensors and electrical protection, predominantly for transportation markets. The firm has oriented itself to benefit from secular trends toward electrification, efficiency, and connectivity. Despite the cyclical nature of the automotive and heavy vehicle markets, electric vehicles and stricter emissions regulations provide Sensata the opportunity to sell into new sockets, which has allowed the firm to outpace underlying vehicle production growth by about 4% historically. We think such outperformance is achievable over the next 10 years, given our expectations for a fleet mix shift toward EVs and Sensata’s growing addressable content in higher-voltage vehicles.

Sensata Technologies hired Stephan von Schuckmann to be its next CEO, effective Jan. 1, 2025. Schuckmann has experience in the automotive and electric vehicle businesses at ZF Group and Bosch Auto Parts.

We think Sensata Technologies is a differentiated supplier of sensors and electrical protection, predominantly for the automotive market. The firm has oriented itself to benefit from secular trends toward electrification, efficiency, and connectivity. Despite the cyclical nature of the automotive and heavy vehicle markets, electric vehicles and stricter emissions regulations provide Sensata the opportunity to sell into new sockets, which has allowed the firm to outpace underlying vehicle production growth by about 4% historically. We think such outperformance is achievable over the next 10 years, given our expectations for a fleet mix shift toward EVs and Sensata’s growing addressable content in higher-voltage vehicles.

We lower our fair value estimate for shares of narrow-moat Sensata Technologies to $58 per share from $64 as we bake in a weaker short-term demand environment and multiple business exits. We continue to see Sensata as well-positioned for growth from electrification across transportation and industrial markets in the long term. However, we believe ongoing weaker demand in these markets will keep weighing on revenue through 2025. Additionally, Sensata is exiting both its Insights business and certain low-margin product lines across its core markets, which will hamper results in the short term. In the long term, we believe these exits help focus the business in the right direction. We like Sensata’s renewed focus on electrification, from which it derives its moat. We continue to see Sensata as a deep value play, with design win momentum that should drive better results between 2026 and 2028. However, we don’t see significant positive catalysts in the short-term.

We lower our fair value estimate for narrow-moat Sensata Technologies to $64 from $69 after lowering our short-term sales forecast. Sensata is trimming low-margin pieces of its portfolio, which we like but will weigh on growth over the next four quarters. Industrial and heavy vehicle demand remains weak and is another headwind to growth. We maintain our longer-term growth thesis for Sensata and continue to like its position in automotive electrification. We see the stock as a deep value play, with fundamental value well above the current stock price and a narrow economic moat but a lack of market confidence in management’s execution. We are optimistic about execution turning around with an ongoing search for a new CEO. We like the interim CEO’s focus on electrical protection as a growth vector within the automotive market, as we view this as the firm’s best opportunity.

We think Sensata Technologies is a differentiated supplier of sensors and electrical protection, predominantly for the automotive market. The firm has oriented itself to benefit from secular trends toward electrification, efficiency, and connectivity. Despite the cyclical nature of the automotive and heavy vehicle markets, electric vehicles and stricter emissions regulations provide Sensata the opportunity to sell into new sockets, which has allowed the firm to outpace underlying vehicle production growth by about 4% historically. We think such outperformance is achievable over the next 10 years, given our expectations for a fleet mix shift toward EVs and Sensata’s growing addressable content in higher-voltage vehicles.

We maintain our $69 fair value estimate for shares of narrow-moat Sensata Technologies after positive first-quarter results and second-quarter guidance leave our long-term thesis intact. Sensata’s second-quarter guidance was above our model, but its updated full-year expectations align with our forecast. Sensata also announced the retirement of its current CEO and that activist investor Elliott Management has gained a board seat. Shares soared 17% following the release, which we attribute to positive expectations for new leadership. We continue to see shares as undervalued. We’re optimistic that a new CEO can unlock shareholder value via better execution and strategic focus. Sensata is well-positioned to capitalize on long-term automotive electrification, in our view, and we believe a new CEO and activist influence will drive a more concentrated focus on this opportunity.

We maintain our $69 fair value estimate for shares of narrow-moat Sensata Technologies after it reported fourth-quarter results and gave an outlook for 2024 that both matched our expectations. Sensata continues to deal with softer end market demand that has weighed on results in the past two years and appears set to continue through 2024. Despite short-term challenges, we continue to like the firm’s focus on electrification and expect this to contribute to higher growth in the long run. With this long-term view, we continue to see significant upside for investors with a longer time horizon. We don’t see catalysts to the stock in 2024 but expect a positive inflection in 2025 and 2026 when the firm’s electrification business wins contribute more meaningfully to revenue.

We think Sensata Technologies is a differentiated supplier of sensors and electrical protection, predominantly for the automotive market. The firm has oriented itself to benefit from secular trends toward electrification, efficiency, and connectivity. Despite the cyclical nature of the automotive and heavy vehicle markets, electric vehicles and stricter emissions regulations provide Sensata the opportunity to sell into new sockets, which has allowed the firm to outpace underlying vehicle production growth by about 4% historically. We think such outperformance is achievable over the next 10 years, given our expectations for a fleet mix shift toward EVs and Sensata’s growing addressable content in higher-voltage vehicles.