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What Made Aptiv's Stock Fall 11% in January

By Jon Quast - Updated Feb 6, 2020 at 11:44AM

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Aptiv's results were better than expected, but the guidance doesn't look great.

What happened

Shares of Aptiv PLC (NYSE: APTV) were already trending down in January before the company reported earnings on Jan. 30. While results were above expectations, the company's guidance disappointed and pushed the stock down further. For the month, shares of Aptiv fell 10.7%, according to data provided by S&P Global Market Intelligence.

A man holds his head in his hands and looks at a downward-trending stock chart.

Image source: Getty Images.

So what

In October, Aptiv revised its full-year 2019 guidance down because of an ongoing strike at General Motors, a key Aptiv customer. Just three months later, Aptiv would beat its revised guidance with $14.4 billion in revenue, adjusted operating income of $1.5 billion, and earnings per share (EPS) of $4.80. Beating its guidance showed that the adverse effects of the strike weren't as bad as feared, though the company estimates they cost it $0.38 in EPS for the year.

These results likely wouldn't have knocked the stock down, but investors disliked the guidance. Aptiv is guiding for full-year 2020 revenue of $14.5 billion to $14.9 billion -- up only 4% year over year at the midpoint. Likewise, EPS guidance fell flat, with management guiding for $4.75 to $5.05. That's just 2% growth at the midpoint.

This disappointing guidance accounted for roughly half of Aptiv's January decline. The other 5% drop didn't come from anything newsworthy. Seasoned investors know that stocks fluctuate over the short term. Indeed, the stock has already gained back a couple of percentage points in February. However, it's important to not get distracted by the daily ups and downs. Rather, we should keep our eyes focused on the long term. 

Now what

When it comes to car stocks, Aptiv is in a good position as a key supplier in a driverless car future. Still, based on guidance, it doesn't look like that future will begin playing out in 2020. Investors would be wise to watch the industry as a whole regarding autonomous driving for any changes. Considering Aptiv's meager growth forecast for the coming year, I'd stay on the sidelines for now.

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