Aptiv Earnings: Despite Continued Industry Headwinds, Results Show Solid Improvement

Narrow-moat-rated Aptiv APTV reported first-quarter earnings per share before special items of $0.91, $0.02 above the $0.89 FactSet consensus estimate and $0.64 higher than the $0.27 year-ago result. First-quarter revenue also beat consensus by 5%, rising 14% to $4.8 billion from $4.2 billion last year due to solid flow-through on volume growth, new business launches, and contributions from acquisitions Wind River and Intercable, partially offset by periodic supply chain disruptions from the chip shortage and unfavorable foreign exchange. Excluding currency, acquisitions, and divestitures, organic revenue climbed 15%, exceeding a 9% increase in global light vehicle production weighted to Aptiv’s customer base by 6 percentage points.

Despite continued headwinds from the chip shortage, increased commodity cost, higher labor cost, and other inflationary cost pressures, first-quarter adjusted EBIT was $437 million for a margin of 9.1%, up 35% from $324 million with a 7.8% margin in the prior year. Free cash flow was negative $278 million versus negative $449 million in the prior year on improved earnings, reduced capital spending, and working capital discipline.

Management reiterated 2023 guidance provided during fourth quarter 2022 earnings with full-year revenue expected to be between $18.7 billion-$19.3 billion and adjusted EBIT of $1.92 billion-$2.08 billion for a margin of 10.3%-10.8%. With no changes to our model, we expect only a modest time value of money increase to our $158 fair value estimate. The 5-star-rated shares of Aptiv currently trade at a compelling 41% discount to our fair value.