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Gentex Corp GNTX

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Morningstar’s Analysis

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Supply Chain Problems Worsen in Gentex's Third Quarter

Analyst Note

| David Whiston, CFA, CPA, CFE |

We see no reason to change our fair value estimate for Gentex, despite the chip shortage hurting third-quarter results, as we believe the company’s long-term growth prospects remain in good shape. We also think its cash-rich, debt-free balance sheet enables Gentex to keep making acquisitions or buy back more stock. Third-quarter buybacks totaled $90.6 million at $32 per share. Diluted EPS of $0.32 missed the Refinitiv consensus of $0.38, and revenue fell nearly 16% year over year to $399.6 million, missing consensus of $434.5 million. Management said the supply chain shortages cost Gentex about 2.5 million-3 million units of production, which is about $125 million in sales. Electronics supply shortages got significantly worse in the third quarter; CEO Steve Downing on the earnings call said that this will continue for several more quarters and that shortages have not bottomed out yet. Downing did tell us that things should improve in the latter part of 2022, which we find reasonable.

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Company Profile

Business Description

Gentex was founded in 1974 to produce smoke-detection equipment. The company sold its first glare-control interior mirror in 1982 and its first model using electrochromic technology in 1987. Automotive revenue is about 98% of total revenue, and the company is constantly developing new applications for the technology to remain on top. Sales from 2020 totaled about $1.7 billion with 38.2 million mirrors shipped. The company is based in Zeeland, Michigan.

600 North Centennial Street
Zeeland, MI, 49464
T +1 616 772-1800
Sector Consumer Cyclical
Industry Auto Parts
Most Recent Earnings Jun 30, 2021
Fiscal Year End Dec 31, 2021
Stock Type Cyclical
Employees 5,303