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.