Delphi Technologies (DLPH) Q4 Earnings Beat, Revenues Lag

Delphi Technologies PLC (NYSE:DLPH) reported mixed fourth-quarter 2018 results wherein earnings surpassed the Zacks Consensus Estimate but revenues missed the same.

Adjusted earnings per share of $1.06 beat the consensus mark by 18 cents and declined on a year-over-year basis on unfavorable product mix and spin-related costs associated with becoming a stand-alone public company, which were, partially offset by reduced incentive compensation accruals.

Revenues in Detail

Revenues of $1.17 billion missed the consensus estimate by $3.7 million and decreased 9.2% year over year on a reported basis and 5% on an adjusted basis (adjustments were made for currency exchange and certain aftermarket original equipment service revenue retained by the former parent).

The top line was hurt by lower GDi sales in China and impacts related to passenger car diesel and WLTP in Europe. This was, however, partially offset by strong growth in Power Electronics and Commercial Vehicle Systems, which grew approximately 30% and 25%, respectively, in the reported quarter.

Segment-wise, Powertrain Systems revenues of $1.02 billion decreased 8.7% year over year on a reported basis and 6% on an adjusted basis. In the reported quarter, lower revenues in passenger car diesel, softness in GDi China and the impact of WLTP partially offset strong growth in Power Electronics and Commercial Vehicle.

Revenues for Delphi Technologies Aftermarket of $225 million declined 10% year over year on a reported basis but improved 3% on an adjusted basis as higher sales to independent aftermarket customers than offset lower sales through the OES channel.

Region-wise, revenue growth was 16% in South America, 6% in North America and 3% in Europe. Revenues from Asia declined 26%.

Operating Results

Adjusted operating income of $125 million decreased 23.8% from the prior-year quarter. Adjusted operating income margin decreased 200 basis points from the prior-year quarter to 10.7%.

Segment-wise, adjusted operating income of Powertrain Systems and Delphi Technologies Aftermarket came in at $99 million (down 30.8% y/y) and $26 million (up 23.8% y/y), respectively.

Balance Sheet and Cash Flow

Delphi Technologies exited fourth-quarter 2018 with cash and cash equivalents of $359 million compared with $340 million at the end of the prior quarter. Long-term debt was $1.49 billion compared with $1.50 billion at the end of the prior quarter.

The company generated $126 million of cash from operating activities in the quarter. Capital expenditures totaled $80 million.

The company repurchased shares worth $10 million and paid $60 million in dividends in 2018.

2019 Guidance

For 2019, Delphi Technologies unveiled its guidance for revenues, adjusted earnings, adjusted operating income margin and cash flow from operations. The company expects revenues in the range of $4.65-$4.75 billion. The Zacks Consensus Estimate of $4.71 lies within the guided range.

Adjusted earnings are expected in the range of $3.00-$3.20 per share. The current Zacks Consensus Estimate of $3.20 is in line with the higher end of the guided range.

Adjusted operating income margin is expected to be around 9%. Cash flow from operations is expected in the range of $320-$350 million. Capital expenditures are projected to be in the range of $310-$330 million. Adjusted effective tax rate is expected to be around 18%.

Zacks Rank & Upcoming Releases

Delphi Technologies currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Investors interested in the broader Zacks Business Services sector are keenly awaiting fourth-quarter 2018 reports of key players like Navigant Consulting (NYSE:NCI) , FTI Consulting (NYSE:FCN) and ICFI International (NASDAQ:ICFI) . All these companies are slated to report on Feb 26.

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