Gentex 3Q Profit Outperforms After Cost Cutting Spree

Shares of Gentex Corp. rose 3.2% on Friday after the auto part manufacturer and seller reported 3Q earnings per share of $0.48 that exceeded analysts’ expectations of $0.40. EPS during the reported period improved by 9.1% year-over-year, reflecting cost reduction initiatives.

Gentex (GNTX) CEO Steve Downing said, “The cost savings actions that we took during the second quarter had a sizable and direct impact on the results reported today. These efforts have reset profitability of the Company for the second half of 2020 and set the stage for what we believe will be strong margin performance as we head into 2021 and beyond.”

Gentex’s 3Q revenues of $474.6 million beat Street estimates of $451.3 million. Quarterly revenues came marginally lower than the net sales of $477.8 million reported in the year-ago quarter. The company noted that shutdowns in the automotive industry caused by the COVID-19 pandemic hurt its financial results during the quarter. (See GNTX stock analysis on TipRanks).

Buoyed by stronger-than-expected 3Q performance, Gentex raised its full-year 2020 sales outlook and re-introduced revenue guidance for the coming year. The company now projects 2020 revenues of between $940 million and $960 million, up from the previous guidance range of $865-$915 million. For 2021, it forecasts revenues to be approximately 15%-20% higher than the projected sales for 2020.

On Oct. 22, J.P. Morgan analyst Ryan Brinkman raised the stock’s price target to $30 (1.9% upside potential) from $29 and reiterated a Hold rating. Brinkman had expected auto part suppliers to beat earnings during 3Q mainly driven by strong production across multiple regions including North America, China, and Europe.

Currently, the Street is cautiously optimistic on the stock. The Moderate Buy analyst consensus is based on 4 Buys and 2 Holds. The average price target of $31.17 implies upside potential of about 5.9% to current levels. Shares are up 1.6% year-to-date.

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