Benzinga - by Nabaparna Bhattacharya, Benzinga Editor.
Truist Securities analyst William Stein reiterated a Hold rating on Sensata Technologies Holding Plc (NYSE: ST), lowering the price target to $43 from $48.
The analyst writes ST is in the middle of a transition from manufacturing a broad array of sensors, mainly for the ICE portion of the automotive market, to expanding its exposure to the electrification theme while developing a software/services business.
Such transitions are more commonly conducted in private markets, and ST's execution as a public company makes it challenging for the stock to work, Stein notes.
Management cited the scaling and mix of the electrification business as a main headwind to margins, with new products expected to become accretive over three years, the analyst adds.
The company announced a cost saving initiative to realign with weaker than expected demand in the near term.
ST expects the plan to result in $16 million-$20 million restructuring charges in Q3 but to save $40 million-$50 million per year in the future.
The company has initiated a Q4 guidance that is below consensus, with sales expected to be 2.4% lower and EPS of $0.94, 2 cents below the consensus.
ST noted reduced charging-related orders in the past quarter as charging networks prepared to adopt North American Charging Standard.
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Based on the above, the analyst lowered the FY24 EPS estimate to $3.90 from $3.96.
Despite the challenges, ST has established medium-term goals of 8% revenue CAGR and 16.5% EPS CAGR. These land CY26 targets at $5.15 billion sales and $5.90 EPS and include an expectation that OPM expands from 19.4% in the last qtr to 21%-23%.
Price Action: ST shares are trading lower by 2.54% to $36.87 on the last check Thursday.
Latest Ratings for ST
| Feb 2022 | UBS | Upgrades | Neutral | Buy |
| Feb 2022 | Morgan Stanley | Maintains | Overweight | |
| Jan 2022 | Baird | Downgrades | Outperform | Neutral |
View the Latest Analyst Ratings
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