Gentex Posts Q4 Beat & Muted Outlook; Shares Drop

Gentex Corporation (NASDAQ: GNTX) reported stronger-than-expected Q4 results, topping both its earnings and revenue estimates. However, the company issued FY2022 revenues guidance below the analyst expectations.

Shares of the supplier of electro-optical products for the global automotive, aerospace, and fire protection industries dropped 1.6% to close at $30.79 on January 28.

Q4 Performance

Adjusted earnings of $0.35 per share decreased 39.7% year-over-year, but were marginally ahead of analysts’ expectations of $0.34 per share. The company reported earnings of $0.58 per share for the prior-year period.

Net sales declined 20.8% year-over-year to $419.8 billion but exceeded consensus estimates of $412.77 billion.

The decrease in revenues reflected a 20% dip in light vehicle production in the key markets of North America, Europe, Japan, and Korea, as well as an industry-wide electronics component shortage.

Further, gross margin declined 660 bps to 34.3% due to lower revenues, electronics component shortages and higher raw material, freight and labor costs.

FY2022 Outlook

The company forecasts higher growth in Full Display Mirror (FDM) based on pent-up demand, and new FDM program launches are expected to accelerate overall growth in 2022 and 2023.

For FY2022, revenues are forecast to be in the range of $1.87 billion to $2.02 billion, versus the consensus estimate of $2.04 billion.

Furthermore, for 2023, the company expects revenue growth of approximately 15% to 20% above the 2022 revenue guidance, based on the Company’s forecasts for light vehicle production for the calendar year 2023.

CEO Comments

Looking ahead, CEO Steve Downing, commented, “We come into 2022 anticipating that at least the first half of the year will continue to see headwinds from supply and labor shortages that we believe will prevent light vehicle production from reaching the IHS estimates shown above.   We also anticipate that these headwinds will continue to cause some margin compression for 2022 due to higher material, transportation and labor costs.”

Positively, he further added, “Despite these challenges, we remain optimistic that 2022 will provide a more predictable operating environment where we can begin to focus on cost containment and hope that the tailwinds created by improved light vehicle production levels over the next few years will combine with our improved product portfolio to create record sales levels for the Company”.

Wall Street’s Take

Following the Q4 results, CFRA decreased the price target on Gentex from $34 to $30 (2.6% downside potential) and reiterated a Hold rating on the stock.

Consensus among analysts is a Hold based on 2 Buys, 1 Hold, and 1 Sell. At the time of writing, the average Gentex stock forecast was $36, which implies 16.9% upside potential to current levels.

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