Yahoo Finance No Surprises In Sensata Technologies's (NYSE:ST) Q2 Sales Numbers But Quarterly Guidance Underwhelms
Sensor manufacturer Sensata Technology (NYSE:ST) reported results in line with analysts' expectations in Q2 CY2024, with revenue down 2.5% year on year to $1.04 billion. On the other hand, next quarter's revenue guidance of $985 million was less impressive, coming in 4.5% below analysts' estimates. Its non-GAAP profit of $0.97 per share was flat year on year.
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Sensata Technologies (ST) Q2 CY2024 Highlights:
Revenue: $1.04 billion vs analyst estimates of $1.04 billion (small miss)
Adjusted Operating Income: $205.7 million vs analyst estimates of $196.6 million (4.6% beat)
EPS (non-GAAP): $0.97 vs analyst estimates of $0.93 (4.7% beat)
Revenue Guidance for Q3 CY2024 is $985 million at the midpoint, below analyst estimates of $1.03 billion
Gross Margin (GAAP): 30%, down from 32.1% in the same quarter last year
Inventory Days Outstanding: 89, down from 95 in the previous quarter
Free Cash Flow of $98.4 million, up 52.9% from the previous quarter
Market Capitalization: $5.76 billion
“We are pleased to report a solid second quarter with performance in line with expectations," said Martha Sullivan, Interim President and CEO of Sensata.
Originally a temperature sensor control maker and a subsidiary of Texas Instruments for 60 years, Sensata Technology Holdings (NYSE: ST) is a leading supplier of analog sensors used in industrial and transportation applications, best known for its dominant position in the tire pressure monitoring systems in cars.
Analog Semiconductors
Demand for analog chips is generally linked to the overall level of economic growth, as analog chips serve as the building blocks of most electronic goods and equipment. Unlike digital chip designers, analog chip makers tend to produce the majority of their own chips, as analog chip production does not require expensive leading edge nodes. Less dependent on major secular growth drivers, analog product cycles are much longer, often 5-7 years.
Sales Growth
Sensata Technologies's revenue growth over the last three years has been unimpressive, averaging 3.9% annually. This quarter, its revenue declined from $1.06 billion in the same quarter last year to $1.04 billion. Semiconductors are a cyclical industry, and long-term investors should be prepared for periods of high growth followed by periods of revenue contractions (which can sometimes offer opportune times to buy).
Sensata Technologies had a difficult quarter as revenue dropped 2.5% year on year, missing analysts' estimates by 0.5%.
Sensata Technologies's revenue inverted from positive to negative growth this quarter, which was unfortunate to see. Looking ahead to the next quarter, the company's management team forecasts a 1.6% year-on-year revenue decline. On the other hand, analysts expect revenue to turn positive over the next 12 months, with average estimates of 5.5% growth.
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Product Demand & Outstanding Inventory
Days Inventory Outstanding (DIO) is an important metric for chipmakers, as it reflects a business' capital intensity and the cyclical nature of semiconductor supply and demand. In a tight supply environment, inventories tend to be stable, allowing chipmakers to exert pricing power. Steadily increasing DIO can be a warning sign that demand is weak, and if inventories continue to rise, the company may have to downsize production.
This quarter, Sensata Technologies's DIO came in at 89, which is 4 days above its five-year average. These numbers suggest that despite the recent decrease, the company's inventory levels are higher than what we've seen in the past.
Key Takeaways from Sensata Technologies's Q2 Results
It was great to see a material improvement in Sensata Technologies's inventory levels. We were also excited its EPS outperformed Wall Street's estimates. On the other hand, its revenue guidance for next quarter missed analysts' expectations and its gross margin shrunk. Overall, this quarter could have been better. The stock remained flat at $37.77 immediately after reporting.
Sensata Technologies may have had a tough quarter, but does that actually create an opportunity to invest right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.
