This tech company beat analysts’ estimates by two cents last quarter, but weaker forward guidance has provided an opportunity to buy at a discount.
Sensata Technologies Holding plc (ST)
From Cabot Stock of the Week
Sensata Technologies, originally recommended by Bruce Kaser for the Buy Low Opportunities Portfolio of Cabot Undervalued Stocks Advisor, first topped 60 in early January, and since then has been trading in a range between 55 and 60, preparing for its next advance.
In his update last week, Bruce wrote, “Sensata is a $3.8 billion (revenues) producer of nearly 47,000 highly engineered sensors used by automotive (60% of revenues), heavy vehicle, industrial and aerospace customers. About two-thirds of its revenues are generated outside of the United States, with China producing about 21%. On October 26, Sensata reported a strong third quarter. Revenues rose 17% net of acquisitions/divestitures, and adjusted earnings increasing 32%. Both were higher than the consensus estimates. Free cash flow was fine, and the balance sheet remains sturdy and under-leveraged, so Sensata is resuming its share buyback program and will probably resume its dividend, as well as also look for more acquisitions.
However, the company’s fourth quarter guidance was light—revenues and earnings were guided to about 3-9% below consensus estimates—due to difficult auto industry conditions and higher inflation. This left the market with an unclear near-term direction. The company’s 2022 outlook remains unchanged.
We retain our Buy rating as the longer-term outlook remains encouraging. ST shares have about 24% upside to our 75 price target.” BUY
Timothy Lutts, Cabot Stock of the Week, cabotwealth.com, 978-745-5532, November 29, 2021