Updated Aug 11 at 7:19am ET.
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Global oil prices are climbing toward $90 a barrel due to renewed conflict in the Middle East. This is a direct concern for the company because it relies on oil-based raw materials to manufacture its sealing and fluid systems.
While the company has been working to pass higher costs along to carmakers, rapid spikes in oil prices can eat into profits before those price adjustments take effect. If these high prices persist, it could make it harder for the business to reach its profit targets for the year.
Source: Barrons
The company reported an adjusted loss of 13 cents per share, which was worse than the 54 cent profit analysts had expected. While revenue grew about 2 percent to $721 million, higher costs for oil-based materials squeezed the bottom line.
Despite the earnings miss, there are signs of progress. The company generated $16 million in free cash flow, which is the cash left over after paying for operations and equipment, and it won $118 million in new contracts. Management is sticking to its full-year goals, betting that these new wins and cost-cutting will outweigh the current pressure from high material prices.
Source: 8-K filing
Stifel Nicolaus lowered its price target from $55 to $53 while maintaining its buy rating. A price target is what an analyst thinks the stock is worth per share. This small adjustment suggests the firm still sees significant room for the stock to rise from its current level of about $28, even with near-term cost pressures.
Source: Stifel Nicolaus
Analysts have kept a steady outlook on the stock following recent earnings reports. Only 2 of 10 analysts rate it a buy, but the average price target of $53 suggests the stock could climb 87% from its current price.
The company has missed analyst targets in four of the last five quarters, suggesting that high costs and industry shifts are making it harder for management to predict exact results.
| Expectation | |
|---|---|
| EPS | $0.92 |
| Revenue | $730M |
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