Aptiv PLC (NYSE: APTV), a maker of components for advanced driver-assist systems, said on Oct. 30 that it earned net income of $246 million in the third quarter. This was up 10.8% from a year ago, on strong global sales growth -- and despite the impact of the United Auto Workers' national strike against key customer General Motors (GM 4.72%).
Excluding one-time items, Aptiv earned $1.27 per share on revenue of $3.6 billion. Both figures were in line with Wall Street's consensus estimates as reported by Thomson Reuters.
However, Aptiv revised its full-year guidance downwards because of the effects of the strike against GM.
The raw numbers
| Metric | Q3 2019 | Change vs. Q3 2018 |
|---|---|---|
| Revenue | $3.6 billion | 2% |
| Operating income | $320 million | (1%) |
| Adjusted operating income | $410 million | (2.4%) |
| Adjusted operating margin | 11.5% | 0.6 pp lower |
| Net income | $246 million | 10.8% |
| Adjusted earnings per share | $1.27 | $0.03 higher |
| Cash flow from operations | $325 million | $187 million higher |
Data source: Aptiv PLC. Adjusted figures exclude the effects of one-time items; Aptiv took $100 million in one-time charges in the third quarter of 2019, for restructuring and charges related to the acquisition of nuTonomy. Aptiv took $97 million in one-time charges in the year-ago period. "Pp" = percentage points.
How the GM strike affected Aptiv
The UAW's nationwide strike against GM that began in mid-September didn't just idle GM's U.S. factories, it also affected GM's suppliers, including Aptiv. Aptiv estimates that the business lost as a result of the strike cost it about $70 million in revenue, $30 million in adjusted operating income, and about $0.10 in adjusted earnings per share.
Aptiv is involved in several efforts to develop self-driving cars, including a partnership with BMW. Image source: Aptiv PLC.
Highlights of Aptiv's third-quarter report
- Aptiv's "advanced safety and user experience" unit is focused on software and computing hardware related to advanced driver-assist systems (ADAS) and self-driving research efforts. Sales grew 9% year over year, powered by strong growth (29%) for ADAS systems in upcoming new products from several automakers, including BMW AG and Fiat Chrysler Automobiles.
- Aptiv entered a joint venture with Hyundai Motor to develop a Level 4 self-driving system.
- Aptiv's "signal and power solutions" unit focuses on connectivity within vehicles, including high-voltage wiring for battery-electric vehicles. The unit's revenue grew 4%, with new wins including electric-truck start-up Rivian and high-voltage charging components for upcoming electric vehicles from Porsche and Audi.
What management had to say
CEO Kevin Clark said that while Aptiv had to cut its full-year guidance to reflect the effects of the GM strike and the impact of tariffs, he wants auto investors to know that he's confident that the company is in good shape and well-prepared for a cyclical downturn:
While our revised outlook for the year reflects the adverse impacts of the GM labor strike, we remain confident in our ability to deliver on our commitments and outperform in the more challenging macro environment. As evidenced by our strong year-to-date performance, the benefits of our robust business model and lean cost structure enable us to continue to invest in growth and effectively deploy capital.
Looking ahead: Aptiv's guidance
With adjustments for the effects of the GM strike and tariffs, here's what Aptiv now expects for the full year:
- Revenue between $14.255 billion and $14.355 billion (prior guidance: between $14.525 billion and $14.725 billion). The 2018 result was $14.4 billion.
- Adjusted operating income between $1.525 billion and $1.545 billion (prior guidance: between $1.650 billion and $1.690 billion). The 2018 result was $1.751 billion.
- Adjusted earnings per share between $4.62 and $4.68 (prior guidance: between $5.05 and $5.15). The 2018 result was $5.26.
