RBC Capital Upgrades Sensata Technologies (ST) to Outperform

RBC Capital upgraded Sensata Technologies (NYSE: ST) from Sector Perform to Outperform with a price target of $46.00 (from $40.00).

RBC analyst Amit Daryanani comments "We are upgrading ST to OP and raising our target to $46 (prior $40); our positive bias is reflective of: 1) CY17 expectations are appropriately set currently in our view and should enable ST to meet if not beat current forecasts of $3.3B/$3.14, 2) Minimal EPS impact from f/x and commodity price movement given ST hedges >80% of currency exposure, we think they are uniquely positioned to see minimal EPS impact from recent USD strengthening, 3) China demand tailwinds: China demand could surprise to the upside given extension of tax reductions on automotive side (albeit at lower levels) and better industrial trends, 4) Self-Help levers: We estimate ST has ~600bps of margin expansion potential over next 2+ years driven by deal integration and could also see EPS upside from lower interest expense as they deleverage, and 5) Valuation: Stock was down -15% in 2016 and valuation is towards multi year lows vs. peers and S&P 500, we see potential for rerating provided we see stable demand, margin and EPS growth from deal integration and deleveraging sustains."

Furthermore, Daryanani believes top-line growth of ~3% and bottom-line growth of ~10% appear achievable as "global auto production should be up ~1%."

For an analyst ratings summary and ratings history on Sensata Technologies click here. For more ratings news on Sensata Technologies click here.

Shares of Sensata Technologies closed at $39.87 Friday.

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