Sensata Technologies Beaten And Battered By Macro And Margins, But Still Leveraged To Electrification

This has been another tough year for companies leveraged to the passenger vehicle market. The year started off with projections of mid-to-high single-digit unit growth in vehicles for the U.S. market, but semiconductor and component shortages have decimated that forecast, with actual year-to-date sales trending down about 9% (this is production-driven, as inventories are still thin). At the same time, electronic component shortages and other inflationary drivers have made life difficult on the margin side for many companies.

Sensata Technologies (NYSE:ST) has seen its share price fall a little more than 20% since my last update. While I suppose that’s not terrible next to other broadly comparable suppliers to the auto and commercial vehicle markets, including Aptiv (APTV), Dana (DAN), and TE Connectivity (TEL), it’s not the year I expected for this sensing and controls company, and 2023 isn’t offering much in the way of macro certainty.

I do think that Sensata looks undervalued, but I also thought that in the high-$50’s. Now Sensata is looking at a potentially softer auto demand environment, as well as weaker trends for highway/off-road business and industrial markets. Provided that mid-single-digit growth is still viable, which I believe it is given the company’s higher EV content and its growth opportunities elsewhere in electrification, these shares offer a worthwhile return at today’s price.

 

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Sensata Technologies Beaten And Battered By Macro And Margins, But Still Leveraged To Electrification