Value Line has initiated coverage of Delphi Automotive PLC (DLPH) in its flagship product, The Value Line Investment Survey. The company is a leading global vehicle components manufacturer that provides electronic, powertrain, active safety, and thermal technology solutions to the automotive and commercial vehicle markets. Its customers include all 25 of the largest automotive original equipment manufacturers (OEMs) in the world. Presently, DLPH operates 126 facilities and 15 major technical centers, utilizing a new regional service model that enables it to more-efficiently serve a broad customer base from low-cost countries. Lately, the manufacturer has shifted focus toward emerging markets, such as China, where it has established a considerable presence via four state-of-the-art production plants.
The company is composed of four separate product segments, which consist of Electrical/Electronic Architecture, Powertrain Systems, Electronics and Safety, and Thermal Systems. The first two arms develop and produce gasoline and diesel engine fuel management applications. These solutions are vital to optimizing powertrain output and performance, while also adhering to new federal emission and fuel consumption standards. In addition, the parts are critical to software that controls passenger safety, security, comfort, and infotainment. Meanwhile, the latter segments specialize in the manufacturing of heating and cooling devices, including compressors, control panels, and HVAC systems. Moreover, these components complete the design for a vehicle’s electrical architecture, comprising connectors, wiring assemblies and harnesses, hybrid high voltage solutions, and electrical backup.
Delphi’s industry has benefitted from the recent swelling of demand for passenger autos and enhanced automotive products. However, its results have felt the impact of economic turmoil, troubled credit markets, and elevated unemployment statistics overseas. Soaring prices at the pump have left many seeking alternatives to driving personal vehicles. That said, the company has shifted its focus toward gaining a larger customer base via advanced technological offerings and a wider market presence around the globe, and, prospects for the automotive sector still inspire some optimism. Three megatrends, namely safety, going green, and driver connection, ought to pave the way for strong top- and bottom-line gains over future quarters. Going forward, the need for drivers to remain safe, while not sacrificing the ability to be connected through social media/Internet, and improve the general driving environment should lead to an improved performance at Delphi.
Although the overall number of the manufacturer’s top competitors has decreased due to ongoing industry consolidation, the automotive parts industry remains extremely competitive. OEMs rigorously evaluate suppliers on the basis of product quality, price, reliability and timeliness of delivery, product design capability, technical expertise and development, new product innovation, financial viability, application of lean principles, operational flexibility, customer service and overall management. Thus, the company’s customers generally require that it demonstrate improved efficiencies, through cost reductions and/or price improvement, on a year-over-year basis. The following businesses represent the largest competitive threat to Delphi Automotive: Lear Corporation (LEA), Molex Inc. (MOLX), Panasonic Corporation (PC), and Visteon Corporation (VC).
The company has recorded better results since emerging from bankruptcy protection in 2009 and consequently taking the business public in November of 2011. In fact, DLPH recently initiated a quarterly dividend of $0.17 a share, reflecting a healthier balance sheet and considerably higher levels of cash flow. All told, a host of new products, coupled with three promising industry trends, augurs well for this company.
Subscribers interested in this automotive components manufacturer are advised to consult Value Line’s quarterly reports for Delphi Automotive PLC, as well as any supplemental reports and relevant articles as important news items arise.
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.