Key Takeaways From Aptiv’s CFO Meeting

RBC Capital analysts provided their key takeaways from Aptiv PLC (NYSE:APTV) Investor Day, highlighting that the company’s fully integrated solution set is a point of differentiation and offers a cost savings value proposition.

According to the analysts, the strategy provides exposure to a TAM (Total Addressable Market) that the company expects to grow by 20% to $150 billion in 2025 in core markets with an additional $200 billion long-term TAM upside opportunity in adjacent markets and L4/L5 autonomy.

According to the analysts, the 2025 margin outlook was better than the consensus expectations and importantly appears more derisked. The analysts believe the company’s integrated portfolio of solutions, which enables them to offer a more comprehensive set of solutions than peers and at a lower cost, is supportive of a continuation of the 8-10% gross operating margin target.

For 2025, the company targets revenues of $23-$24 billion, compared to the Street estimate heading into the investor day at $24.6 billion. While the revenue guide is below consensus, operating income is expected to grow to $3.2-$3.5 billion with margins of 14%-14.5%, and above the Street estimates of $3.1 billion and margins of 12.5%.

RBC Capital analysts lowered their price target on Aptiv PLC (NYSE:APTV) to $115 from $120, noting that it is their favorite supplier for 2023 and expectations seem more reasonable now.

The analysts expect 2022 revenue at approximately $17.35 billion. In thinking about the drivers for 2023, the analysts think management believes flat LVP is a good starting point. The company is sticking with its 8-10% growth over the market.

According to the analysts, helping the topline are two acquisitions: (1) IAS which was expected to have $265 million in 2022 sales. The deal closed on 12/1/22 so most of this is additive in 2023; (2) Wind River announced 1/11/22 but curiously hasn’t closed. Wind River had $400 million in 2021 revenue, so the analysts assume a similar level for 2023. Thus, including acquisitions, the analysts see 2023 revenue of approximately $19.4 billion as possible.

Aptiv PLC (NYSE:APTV) reported mixed Q4 results and 2022 guidance with better-than-expected top-line growth above market but steeper cost pressure in margins, showcasing the company’s reality for the next 12-24 months.

The company continues to benefit from solid acceleration of its revenue and bookings tied to electrification and active safety. According to the analysts at Deutsche Bank, this is likely to continue for years to come in light of 2021’s record bookings and the company’s goals to book at least as much in 2022.

At the same time, however, the company is seeing pressure not only from temporary supply chain disruptions, but also from inflation in costs of chips and electronic components which could be stickier. The analysts raise their 2022 revenue estimate towards the high-end of company guidance but expect margin expansion to remain constrained by costs, estimating $4.25 of EPS in 2022 and $6.55 in 2023.

Aptiv PLC (NYSE:APTV) reported mixed Q4 results and 2022 guidance with better-than-expected top-line growth above market but steeper cost pressure in margins, showcasing the company’s reality for the next 12-24 months.

The company continues to benefit from solid acceleration of its revenue and bookings tied to electrification and active safety. According to the analysts at Deutsche Bank, this is likely to continue for years to come in light of 2021’s record bookings and the company’s goals to book at least as much in 2022.

At the same time, however, the company is seeing pressure not only from temporary supply chain disruptions, but also from inflation in costs of chips and electronic components which could be stickier. The analysts raise their 2022 revenue estimate towards the high-end of company guidance but expect margin expansion to remain constrained by costs, estimating $4.25 of EPS in 2022 and $6.55 in 2023.

Aptiv PLC (NYSE:APTV) made an announcement today, according to which it will acquire Wind River, an intelligent edge software provider for $4.3 billion from TPG Capital. The deal is expected to close in mid-2022.

This acquisition (Wind River expected to grow revenue from $400 million in 2021 to $1 billion by 2026), expands Aptiv’s smart vehicle platform software capability further down the stack to provide a real-time operating system and open-source middleware layer that enables faster software development and deployment time for features such as over-the-air connectivity and ADAS.

Analysts at Berenberg Bank commented on Aptiv PLC (NYSE:APTV) lowered 2021 guidance, decreasing their price target on the company’s shares to $182 from $187, while reiterating their buy rating.

The company lowered 2021 revenue guidance from $16.1 billion-16.4 billion to $15.1 billion-15.5 billion and adjusted operating margins from 9.9-10.2% to 7.6-8.4% on lower vehicle production.

While the negative operating leverage on lower revenues is worse than the analysts anticipated, they believe the market has largely expected downward guidance revisions. In their view, the revision de-risks the upcoming earnings release and they would be buying on any share price weakness now that estimates have once again been re-based.