The 'New' Delphi Technologies Will Outperform Peers, Says Jefferies

With its internal combustion engine and electric tech segments, Delphi Technologies PLC DLPH has its hands in the auto industry’s past and its future.

The position buffers Delphi against unstable demand and ensures its solid relevance throughout the transition. Largely for this reason, the firm has secured multiple Buy ratings since its spinoff from Aptiv PLC APTV.

The Rating

Jefferies analyst David Kelley initiated coverage on Delphi Technologies with a Buy rating and $60 price target.

The Thesis

Jefferies anticipates favorable capital return, a 50-basis point margin expansion and more than 10 percent compound annual growth in earnings before interest and taxes through 2020. Content growth in gas and hybrid/electric segments could drive broader 5-percent organic compound annual growth, Kelley said. (See the analyst's track record here.) 

Delphi could also profit off its dual exposure to both fuel-efficient ICE clients and the electrification trend, the analyst said. 

“Although EV customer insourcing remains a risk, plus-30-percent market growth suggests considerable greenfield opportunity,” Kelley said in a Monday note. “Regardless, our bias to incremental electrification and more affordable hybrids to 2022 is a ‘best case’ scenario for DLPH given opportunity to supply to the downsized ICE [via variable valve train and gas direct injection] and the battery system [power electronics].”

Price Action

Delphi closed up 2.1 percent Monday at $53.09.

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