News Spotlight: Gentex Corporation (NASDAQ: GNTX)

Gentex Corporation (NASDAQ: GNTX) stock observed trading -5.72% off 52-week high price. On the other end, the stock has been noted 32.42% away from low price over the last 52-weeks. The stock disclosed a move of 1.44% away from 50 day moving average and 8.86% away from 200 day moving average. Moving closer, we can see that shares have been trading -2.09% off 20-day moving average. It has market cap of $6047.12M and dividend yield of 1.95%.

Gentex Corporation (NASDAQ: GNTX), a leading supplier of digital vision, connected car, dimmable glass and fire protection technologies, declared financial results for the three and six months ended June 30, 2019.

2nd Quarter 2019 Summary

Net Sales growth of 3% quarter over quarter versus an 8% quarter over quarter reduction in global light vehicle production volumes

Gross margin of 37.7% including negative tariff impact of 60 basis points

Sequential gross margin improvement of 150 basis points compared to the first quarter of 2019

Quarter over quarter earnings per diluted share growth of 5% to $0.42

3.1 million shares repurchased during the quarter at an average of $22.72 per share

Revised 2019 calendar year guidance for improvements in gross margin, depreciation and amortization, and effective tax rate ranges

For the second quarter of 2019, the Company reported net sales of $468.7 million, which was an increase of 3% compared to net sales of $455.0 million in the second quarter of 2018. This growth was in contrast to global light vehicle production that declined approximately 8% in the second quarter of 2019 when compared to the second quarter of 2018. The actual global light vehicle production levels worsened approximately 4% for the second quarter of 2019, when compared to IHS Markit’s mid-April forecast for the second quarter of 2019.

“The market conditions of the second quarter of 2019 were very similar to those of the first quarter of this year, with light vehicle production down from the same period last year. Once again, industry-based vehicle production forecasts were overly optimistic which resulted in actual new vehicle builds coming in well below forecast,” said President and CEO Steve Downing. “Despite the current vehicle production environment being down about 8% from the second quarter of 2018, we were able to outperform the underlying market by approximately 11%, which resulted in a quarter over quarter net 3% revenue growth rate. For the first six months of 2019, global vehicle production levels have been off by approximately 7% from the same period last year, but we have been able to maintain our growth targets for the year. In fact, based on the first six months of the year and our forecast for the second half, we are raising the bottom of the range and narrowing our full year revenue guidance to be between $1.87 and $1.90 billion. Based on our first half of 2019 performance and the current IHS forecast for the second half of the year, we are poised to outperform global automotive markets by approximately 7% for the year.”

For the second quarter of 2019, the gross margin was 37.7%, which increased significantly when compared to a gross margin of 36.2% in the first quarter of 2019. On a quarter-over-quarter basis, the gross margin for the second quarter of 2019 declined slightly compared to a gross margin of 38.0% for the second quarter of 2018. The quarter-over-quarter gross margin was negatively impacted by approximately 60 basis points due to incremental tariffs that became effective at various times starting in July 2018. “Our sequential gross margin expansion in 2019 was due to positive product mix shifts, which include Full Display Mirror and domestic exterior-mirror growth, better than expected purchasing cost reductions in the first half of calendar year 2019, cost discipline throughout the Company, and success in mitigating some of the escalating costs related to tariffs that have been impacting the Company since July 2018,” said Downing. “In fact, if not for the 60 basis points of margin erosion due to tariffs, our gross margin would have improved on a quarter over quarter basis. Our ability to maintain gross margins in a difficult production environment is a testament to the hard work and cost focus of the Gentex team.”

Operating expenses during the second quarter of 2019 were up 5% to $48.6 million when compared to operating expenses of $46.1 million in the second quarter of 2018. “We continue to manage our operating costs carefully and with discipline, while maintaining our focus on future growth. The primary driver of increases in operating expenses is funding the resources needed for the development and launch of already sold products including additional auto-dimming mirror applications, Full Display Mirror, Integrated Toll Module, and our new aerospace program. In addition, we are deploying resources to expand the product portfolio in the areas of connected car, digital vision and large area dimmable devices, which we believe will provide the potential for long-term growth,” concluded Downing.

Income from operations for the second quarter of 2019 increased 1% to $127.9 million when compared to income from operations of $126.7 million for the second quarter of 2018. The increase in income from operations was primarily due to the increase in revenue on a quarter over quarter basis, but was partially offset by lower operating margins when compared to the same period last year.

During the second quarter of 2019, the Company’s effective tax rate was 16.4%, up from 15.5% during the second quarter of 2018, primarily driven by a decrease in discrete tax benefits related to stock-based compensation.

Net income for the second quarter of 2019 was relatively flat at $109.0 million compared to the second quarter of 2018.

Earnings per diluted share for the second quarter of 2019 increased 5% to $0.42, when compared to $0.40 for the second quarter of 2018, primarily as a result of a 6% reduction in diluted shares outstanding from share repurchases, due to the continued execution of the Company’s previously disclosed capital allocation strategy.

Automotive net sales in the second quarter of 2019 were $456.6 million, compared with automotive net sales of $444.2 million in the second quarter of 2018. The growth in automotive sales was driven primarily by strength in Full Display Mirror and domestic exterior auto-dimming mirror unit shipment growth.

Other net sales in the second quarter of 2019, which includes dimmable aircraft windows and fire protection products, were $12.1 million, an increase of 13% compared to other net sales of $10.8 million in the second quarter of 2018.

Share Repurchases

During the second quarter of 2019, the Company repurchased approximately 3.1 million shares of its common stock at an average price of $22.72 per share, for a total of $69.9 million of share repurchases. To date for calendar year 2019, the Company has repurchased approximately 7.8 million shares of its common stock at an average price of $21.30, for a total of approximately $166.1 million of share repurchases. As of June 30, 2019, the Company has approximately 26.0 million shares remaining available for repurchase pursuant to the previously announced share repurchase plan. The Company intends to continue to repurchase additional shares of its common stock in the future in support of the previously disclosed capital allocation strategy, but share repurchases may vary from time to time and will continue to take into account macroeconomic issues, market trends, and other factors that the Company deems appropriate.

The USA based company Gentex Corporation moved with change of 0.26% to $23.57 with the total traded volume of 1869257 shares in recent session versus to an average volume of 1461.25K. The stock was observed in the 5 days activity at 0.17%. The one month performance of stock was 0.13%. GNTX’s shares are at 7.09% for the quarter and driving a -0.42% return over the course of the past year and is now at 16.63% since this point in 2018.  Right now the stock beta is 1.2. The average volatility for the week and month was at 2.08% and 1.79% respectively. There are 256.56M shares outstanding and 254.72M shares are floated in market.

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