A month has gone by since the last earnings report for Standard Motor Products (SMP). Shares have added about 2.7% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Standard Motor Products due for a pullback? Before we dive into how investors and analysts have reacted as of late, let’s take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Standard Motor Q1 Earnings & Sales Decline Y/Y
Standard Motor reported adjusted earnings of 43 cents per share in first-quarter 2020, in line with the Zacks Consensus Estimate. However, the bottom line came in higher than the prior-year quarter’s 57 cents per share. Dismal performance of both its major segments — Engine Management and Temperature Control — acted as dampeners.
First-quarter earnings from continuing operations were $9.6 million compared with $13.1 million recorded in the prior-year quarter. Total revenues decreased to $254.3 million, missing the Zacks Consensus Estimate of $256 million. The tally also came in lower than the year-ago figure of $283.8 million.
Gross profit decreased to $70.4 million from the year-ago quarter’s $77.9 million. Operating income slid to $14.3 million from $17.9 million recorded in the year-ago quarter.
During the March quarter, revenues from the Engine Management segment fell 5.6% year on year to $201.1 million. Operating income was $21.6 million compared with $22.3 million in the prior-year quarter. Lower pipeline orders and weak sales amid the COVID-19 pandemic affected the segment’s performance.
Revenues in the Temperature Control segment decreased 25.3% year over year to $51.4 million. The segment incurred an operating loss of $348,000 against operating income of $2.05 million in first-quarter 2019.
Revenues in the All Other segment decreased to $2.54 million from the $2.83 million recorded in the prior-year quarter. The segment reported an operating loss of $6.7 million, wider than loss of $6.4 million in corresponding quarter of 2019.
Standard Motor had cash and cash equivalents of $13.3 million as of Mar 31, 2020, compared with $10.4 million as of Dec 31, 2019. Long-term debt was $111,000 compared with $129,000 recorded as of Dec 31, 2019. Net cash used in operating activities totaled $32.8 million. Capex during the quarter amounted to $4.4 million.
Cost-Cut Actions Amid COVID-19
In a bid to boost financial flexibility amid coronavirus-led uncertainty, the firm has drawn down an additional $75 million from its bank credit line. Standard Motor has also suspended its quarterly payouts and stock buyback programs. It also intends to tighten discretionary capex and anticipates achieving substantial savings from the above-mentioned cost-cut efforts. The company would slash 25% salary of its top executives and board of directors.
How Have Estimates Been Moving Since Then?
Fresh estimates followed a downward path over the past two months. The consensus estimate has shifted -50% due to these changes.
At this time, Standard Motor Products has a poor Growth Score of F, however its Momentum Score is doing a lot better with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren’t focused on one strategy, this score is the one you should be interested in.
Standard Motor Products has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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