Key Highlights

  • Management guides third-quarter revenue of USD 957 million to USD 987 million, against consensus of USD 972.97 million.
  • Management guides third-quarter adjusted EPS of 0.93 to 0.97, and the consensus estimate of 0.96 sits inside that range.
  • Second-quarter adjusted EPS of 0.98 was USD 0.03 above guidance's high end, and free cash flow was USD 186.4 million.
  • Net leverage reached 2.4x, and management cited a gross debt reduction of USD 762 million.

Sensata Technologies (NYSE:ST) reports third-quarter results on Tuesday, Oct. 27, after the market closes. Consensus stands at EPS of 0.96 on revenue of USD 972.97 million, and the company has a market capitalization of USD 5.92 billion.

Sensata Technologies makes sensors and electrical protection components and reports three operating segments. In the second quarter, it reported revenue of USD 990.6 million against USD 943.4 million and net income of USD 102.1 million against USD 60.7 million.

Estimates Against Company Guidance

Management guided third-quarter revenue to USD 957 million to USD 987 million, adjusted operating income to USD 186 million to USD 193 million, adjusted operating margin to 19.4% to 19.6%, adjusted net income to USD 137 million to USD 142 million and adjusted EPS to 0.93 to 0.97.

The revenue estimate of USD 972.97 million and the EPS estimate of 0.96 both sit inside those ranges. The second-quarter diluted EPS was 0.70 against 0.41, and the estimates table does not state whether the 0.96 is adjusted.

What Management Guided and What It Left Open

Management said second-quarter revenue, adjusted operating income and adjusted EPS were above its expectations, with adjusted EPS of 0.98 exceeding the high end of guidance by USD 0.03. Adjusted operating income was USD 193 million against USD 179 million, and adjusted operating margin was 19.5% against 19.0%, 50 basis points higher.

On China, management said the domestic market has softened and mix headwinds remain as share shifts toward local manufacturers, without quantifying the effect. Management said the third-quarter guide includes about USD 10 million of tariff-related pass-through revenue, similar to the second-quarter level, and that EPS guidance reflects seasonal summer shutdowns in Europe. It cited India revenue above USD 20 million, up 40%.

Management also said a 1.5x to 2.5x addressable market expansion per megawatt is expected in data centers as architectures move to higher voltage, with five platform concept wins year to date.

Changes in the Latest Results

Revenue rose 5.0%, and aerospace, defense and commercial equipment revenue was USD 233.7 million, up 10.9% organically. Industrial segment organic growth was 4.2%. Operating income was USD 165.4 million against USD 138.1 million, and income before taxes was USD 132.5 million against USD 105.8 million.

Free cash flow was USD 186.4 million, up 61.4%, a conversion rate of 130% of adjusted net income. Net leverage of 2.4x reached the company's 2.5x target two quarters ahead of schedule, after USD 406 million of long-term debt was retired in the quarter.

A USD 0.12 per share dividend was declared for the third quarter, and USD 17.5 million was returned to shareholders in the second quarter. Capital expenditures ran at 2% of revenue year to date, against historical levels of about 4%, which management tied to improved capacity utilization and automation. Net cash used in financing activities for the six months was USD 468.5 million against USD 160.8 million, primarily from the settlement of a cash tender offer. The estimates table lists a market capitalization of USD 5.92 billion.

Comparisons to Make in the Report

Revenue against the USD 957 million to USD 987 million guide and adjusted EPS against 0.93 to 0.97 are the first comparisons. Other markers are adjusted operating margin against 19.4% to 19.6%, China mix and free cash flow.