Saturday, December 7

Delphi One Of S&P’s Biggest Winners So Far In 2019

DETROIT, Mich.­–Auto sales are dipping, and OEM stocks like General Motors and Ford are stagnant. But parts supplier Delphi Technologies, maker of brake pads, discs and other lines of critical auto supplies, is one of the biggest gainers among the Standard & Poor 500 stocks since January 1, bringing investors a 38% return to date.

Before a slight slide on price from $22.50 earlier this month, it was the second biggest gainer behind just Xerox.

Still, investors and analysts believe in Delphi going forward as a major player in the electrification of the new-vehicle fleet.

In the past week, KeyBanc auto/suppliers analyst James Picariello raised Delphi’s rating from “underweight” to “sector weight” In the last week.

At Delphi, which Picariello said in December needed a “new story” for investors, there’s now strong investor support for new CEO Rick Dauch, “who has outlined an encouraging road map to improve Delphi’s operations over the next 12-24 months,” he wrote.

At Oppenheimer, Analysts Noah Kaye and Colin Rusch upgraded Delphi to “outperform” and introduced a $53 price target. That would be a significant outperform relative to forecasts for the broader market, as the market is expected to trade mostly sideways with not a lot of growth through the 2020 election.

“We expect Delphi to execute on bookings growth and self-help opportunities and, via its power electronics portfolio, participate in the growth of vehicle electrification.”

The company has already won about $5 billion of lifetime bookings for a power electronics portfolio, and it’s positioned to capitalize on a doubling electric-vehicle market in China and growing EV markets in the U.S. and Europe, Oppenheimer noted.

“We expect Delphi to maintain bookings momentum and be opportunistic on M&A,” the analysts also wrote.

Last January, BMO Capital Markets analyst Richard Carlson initiated coverage of Delphi with an “outperform” ratings and a $73 price target.

Trump administration tariffs could hurt Delphi’s bottom line in 2019, as they can for any other supplier and the OEMs, but companies like Delphi are reconfiguring their supply chain to minimize the hit to profit margins.

Delphi’s boosters point to the company’s business in alternative propulsion systems, specifically its lines of business with electric and autonomous vehicles.

Delphi’s brake business these days consists of brake pads, discs, calipers, caliper sliding kits, etc. It sold off its brake systems business a decade ago.

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David Kiley is Chief of Content for The BRAKE Report. Kiley is an award-winning business journalist and author, having covered the auto industry for USA Today, Businessweek, AOL/Huffington Post, as well as written articles for Automobile and Popular Mechanics.