Sensata Not Enjoying The Best Sentiment, But Sensitized To Future Electrification Growth

 

Sensata Technologies (ST) is doing its part.

FY 2021 revenue at this leading sensing and controls business was within a fraction of a percent of my expectations and EBITDA and FCF were both better, and the company continues to post wins in its electrification portfolio and in other growth/diversification efforts like telematics. And yet, the shares have nothing to show for it, trading down very slightly from my last update. For what little it helps, Amphenol (APH) and TE Connectivity (TEL) haven’t done meaningfully better over that same time.

I can see a few reasons for near-term skepticism. Sensata’s track record with quarterly guidance isn’t the best, and conservative guidance may be spooking investors who expect they’ll miss the lower bar. I also expect some “turbulence” as auto OEMs transition from internal combustion engines (diesel in particular) to electric, and efforts like telematics are still unproven. Still, those would be issues if the shares were expensive, and that’s not the case. Given the company’s underappreciated leverage to electrification (vehicles and elsewhere) and telematics, I think this is an overlooked name worth a second look.

 

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Sensata Not Enjoying The Best Sentiment, But Sensitized To Future Electrification Growth