Gentex Earnings: Company Fights Off Many Challenges to Still Post a Good Performance

Gentex’s stock rose 5.4% on Oct. 25 after it reported third-quarter results that beat the LSEG consensus (diluted EPS of $0.53 versus $0.48 consensus). We are not changing our fair value estimate. Revenue rose 5.7% year over year while mirror shipments fell 3%, both of which outperformed a 6% light vehicle production decline in the firm’s core markets of North America, Europe, Japan, and Korea. We think the firm had a strong quarter in light of numerous challenges such as mixed headwinds, frequent customer changes leading to manufacturing waste and overtime, and struggling production in regions like Europe taking about $25 million-$30 million from revenue. Gentex’s revenue growth plus purchasing cost reductions negotiated by its skilled buying team still enabled gross margin to rise by 30 basis points to 33.5%. This metric was also 60 basis points higher than the second quarter. Management expects fourth-quarter results similar to the third quarter, which we think is reasonable provided a region like Europe doesn't see a collapse in production.