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Delphi Technologies Cuts Revenue and Margin View: Here’s Why


Delphi Technologies PLC DLPH announced that it has trimmed the revenue and margin outlook for 2018.

The company now expects revenue growth to be flat with 2-4% growth projected earlier. Adjusted operating margin is expected in the range of 11.3-11.5% compared with the previous guidance of 12.1-12.3%.

Delphi Marred by Multiple Headwinds

In China, Delphi is grappling with soft revenues due to lower sales from many of its local OEM customers. As Europe is shifting to Worldwide Harmonized Light Vehicle Test Procedure (WLTP), the company is witnessing weak sales over there. Declining business from light duty diesel is an added concern. These headwinds are expected to continue through 2018, adversely impacting Delphi’s top line.

Also, margins are likely to be negatively impacted by lower foreign exchange benefits, higher spin-related costs, unfavourable product mix and high commodity prices this year.

Lastly, President Trump has reiterated auto tariff threats, and his plan of imposing restrictions on auto imports from the European Union, Mexico, Japan and Canada appears firm. Tariffs will lower auto sales and significantly reduce profits of auto industry participants.

So far this year, shares of Delphi have declined a massive 54.3% against the 6.1% growth of the industry it belongs to.

Zacks Rank and Stocks to Consider

Currently, Delphi carries a Zacks Rank #5 (Strong Sell).

Some better-ranked stocks in the broader Business Services sector include WEX WEX, ICF International ICFI and Paychex PAYX, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The long-term expected earnings per share growth rate for WEX, ICF International and Paychex is 15%, 10% and 8.4%, respectively.

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