Sensata Technologies's (NYSE:ST) Q1 Sales Top Estimates, Stock Soars

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Sensor manufacturer Sensata Technology (NYSE:ST) reported Q1 CY2024 results beating Wall Street analysts' expectations, with revenue flat year on year at $1.01 billion. The company expects next quarter's revenue to be around $1.04 billion, in line with analysts' estimates. It made a non-GAAP profit of $0.89 per share, down from its profit of $0.92 per share in the same quarter last year.

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Sensata Technologies (ST) Q1 CY2024 Highlights:

• Revenue: $1.01 billion vs analyst estimates of $986.3 million (2.1% beat)
• EPS (non-GAAP): $0.89 vs analyst estimates of $0.85 (4.7% beat)
• Revenue Guidance for Q2 CY2024 is $1.04 billion at the midpoint, roughly in line with what analysts were expecting (EPS guidance for the same period also in line)
• Gross Margin (GAAP): 31.5%, down from 32.8% in the same quarter last year
• Inventory Days Outstanding: 95, up from 93 in the previous quarter
• Free Cash Flow of $64.36 million, up 13.5% from the previous quarter
• Market Capitalization: $5.26 billion

“We are pleased to report a solid start to 2024, with first quarter revenue and adjusted operating margins towards the high end of our guidance range,” said Jeff Cote, CEO and President of Sensata.

Originally a temperature sensor control maker and a subsidiary of Texas Instruments (NASDAQ:TXN) for 60 years, Sensata Technology Holdings (NYSE: ST) is a leading supplier of analog sensors used in industrial and transportation applications, best known for its dominant position in the tire pressure monitoring systems in cars.

Analog SemiconductorsDemand for analog chips is generally linked to the overall level of economic growth, as analog chips serve as the building blocks of most electronic goods and equipment. Unlike digital chip designers, analog chip makers tend to produce the majority of their own chips, as analog chip production does not require expensive leading edge nodes. Less dependent on major secular growth drivers, analog product cycles are much longer, often 5-7 years.

Sales GrowthSensata Technologies's revenue growth over the last three years has been unremarkable, averaging 10.1% annually. As you can see below, this was a weaker quarter for the company, with revenue growing from $998.2 million in the same quarter last year to $1.01 billion. Semiconductors are a cyclical industry, and long-term investors should be prepared for periods of high growth followed by periods of revenue contractions (which can sometimes offer opportune times to buy).

While Sensata Technologies beat analysts' revenue estimates, this was a sluggish quarter for the company as its revenue only grew 0.9% year on year. Sensata Technologies's growth, however, flipped from negative to positive this quarter. This encouraging sign will likely be welcomed by shareholders.

Although Sensata Technologies returned to positive revenue growth this quarter, its management team expects revenue to decline 2.1% next quarter. On the other hand, Wall Street expects the favorable trend to continue, projecting 3.2% revenue growth over the next 12 months.

Product Demand & Outstanding InventoryDays Inventory Outstanding (DIO) is an important metric for chipmakers, as it reflects a business' capital intensity and the cyclical nature of semiconductor supply and demand. In a tight supply environment, inventories tend to be stable, allowing chipmakers to exert pricing power. Steadily increasing DIO can be a warning sign that demand is weak, and if inventories continue to rise, the company may have to downsize production.

This quarter, Sensata Technologies's DIO came in at 95, which is 10 days above its five-year average, suggesting that the company's inventory has grown to higher levels than we've seen in the past.

Key Takeaways from Sensata Technologies's Q1 Results We enjoyed seeing Sensata Technologies exceed analysts' EPS expectations this quarter. We were also glad its revenue outperformed Wall Street's estimates. That guidance for next quarter was in line with expectations shows that this company is on track. Zooming out, we think this was still a decent, albeit mixed, quarter, showing that the company is staying on track. The stock is up 6.5% after reporting and currently trades at $38.03 per share.