Bullish stock to watch: Sensata Technologies Holding PLC (NYSE: ST)

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Sensata Technologies Holding PLC (NYSE: ST) stock lost over 5.5% on 28th July, 2020 (Source: Google finance) post lower than expected second quarter of 2020 performance. The ongoing COVID-19 pandemic hurt the group’s target markets to a huge extent, which fell over 40% during the quarter, leading to the net revenue fall by 33.9% during the quarter. The net revenues fell 22.3% due to the first half of 2020.  Moreover, due to delay in product launches from some customers the firm expects this impact in the coming two quarters.  Adjusted net income fell 81.6% yoy to $27.7 million, while Adjusted EPS fell 80.6% yoy to $0.18 during the second quarter.

The firm’s total volume fell during the quarter against the earlier quarters with industrial business falling 14.6% organically, on the back of COVID-19 impact while the medical equipment business, in particular, providing sensors to ventilator manufacturers offset the overall division weakness to a certain extent. The aerospace business lost 39.4% organically on the back of decrease in grounding of planes. The heavy vehicle off-road business organic revenue lost 31.5%, hurt by Europe as well as Americas production levels. Automotive business organic revenue lost 41.6%.

On the other hand, the firm had over $125 million of new business wins, leading to a total $225 million in new business wins for the first half of 2020. The firm closed another $50 million in electrification new business wins, which is currently $108 million year-to-date. The firm continued to test their Smart & Connected proof-of-concepts with several leading fleet managers while also working with several telematics companies that would transmit data collected by Sensata’s vehicle area network to the cloud in order to provide valuable insights to fleet managers.

The firm expects sequential improvements in the third and fourth quarters this year but remains cautious due to the ongoing uncertainty related to the ongoing COVID-19 Pandemic. The firm generated $45 million in free cash flow during the second quarter and $114 million year-to-date. They also cut capital expenditures for the year as well as cut operating expenses in the second quarter.

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