On Thursday, CFRA adjusted its outlook on Aptive PLC (NYSE:APTV), reducing the 12-month price target to $110 from $125, while reaffirming a Strong Buy rating for the company's stock. The revision reflects a lower projected price-to-earnings (P/E) ratio, now set at 14.9 times the estimated earnings for 2025, which is below Aptive's ten-year average forward P/E of 24.4 times.
Aptive recently reported first-quarter adjusted earnings per share (EPS) of $1.16, surpassing the consensus estimate of $1.00 and marking a significant increase from $0.91 in the same quarter the previous year. This 27% rise in EPS was primarily due to unexpectedly high margins. Despite revenues growing by 1.7% to reach $4.90 billion, which was $90 million short of consensus expectations, the company's adjusted operating margin expanded by 200 basis points to 11.1%.
Following these results, Aptive has raised its full-year EPS guidance to a range of $5.80 to $6.30, up from the previous forecast of $5.55 to $6.05, and ahead of the current consensus of $5.67. CFRA has also increased its adjusted EPS estimates for Aptive to $6.00 from $5.85 for 2024 and to $7.40 from $7.35 for 2025.
The firm's confidence in Aptive is bolstered by the company's recent performance and prospects, including a record level of new business awards totaling over $34 billion in 2023. Despite the stock's underperformance, with a 4% decline in 2023 and a 22% drop year-to-date, CFRA believes that Aptive's valuation is the most attractive it has been in years and sees the potential for EPS to grow to more than $10 in the coming years.
InvestingPro Insights
InvestingPro data and insights provide a deeper look into Aptive PLC's financial health and market position. With a market capitalization of $19.02 billion and a trailing twelve months revenue of $20.05 billion, Aptive has shown a robust revenue growth of 14.65% as of Q4 2023. The company's adjusted price-to-earnings (P/E) ratio stands at a modest 5.94, which is significantly lower than the 14.9 times earnings projected by CFRA for 2025. Its P/E ratio is indicative of the stock trading at a low earnings multiple, as noted in one of the InvestingPro Tips.
Despite challenges such as weak gross profit margins, which are currently at 17.24%, and a predicted drop in net income this year, Aptive remains a prominent player in the Automobile Components industry. Furthermore, the company's liquid assets surpass its short-term obligations, providing some financial stability. It's also worth noting that Aptive does not pay a dividend, which could be a consideration for income-focused investors.
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